However, with a significant slowdown now apparent in the US economy and with most of the rest of the world operating at near, or somewhat above potential, some slackening (down to about 4%) in the pace of global economic growth is now virtually certain for 2008.
Expansion in the developed economies of Western Europe and Japan is likely to continue at around 2% in 2008. However, in emerging markets, China (at 9.5%) continues to achieve impressive growth rates, and the Asia Pacific region generally retains its position as the world’s most dynamic area. India is also regularly posting annual growth of around 8%, and robust growth of 5% per annum is likely to continue through to 2008 in Eastern Europe.
In the US, after three years of growth well above 3%, the US economy is slowing amid a steadily weakening housing market and the repercussions of the credit crisis. Indeed, residential investment exhibited its steepest fall in 15 years during 2007. Growth in 2008 is likely to slow, but by how much is uncertain, however with house prices and consumer sentiment falling markedly during 2007, a recession during 2008 cannot be ruled out.
The Eurozone posted growth of 2.6% during 2007, its best since 2000. A key factor was an improving German economy. Consumer spending in Germany increased by 1% after several years of stagnation or decline, while industrial output surged by almost 5% on the back of increased exports. However, there are already signs of weakening activity as Eurozone growth lost pace in the fourth quarter of 2007. Eurozone expansion is expected to decelerate to around 2% through 2008, although a further threat to the outlook for 2008 comes from the sharp rise of the Euro against the Dollar in recent months, suggesting a more subdued outlook for exports.
The Japanese economy has seen two years of growth at 2.7% amid strong exports. However, consumer spending in 2007 began to fade in line with weak earnings growth. GDP growth for 2008 is expected to ease to 2% as consumer spending remains sluggish and investment, while continuing to grow strongly, eases after two years of expansion at around 8%.
What does all this mean for the construction industry on a global scale?
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