The chiaroscuro of the construction industry for 2023

industry buildingone of the hardest hit after the impact of the Covid-19 pandemic, tries to be optimistic about the scenario of 2023; However, while there are some signs that give hope, there are others that worry the participants in this sector.

Specialists agree that for the following year there will still be the challenges will continue that have been accentuated since the health emergency, such as the high material price inflationas well as the impact of interest rate hikes and cautious investment by developers, but there are beginning to be signs that could favor the scenario of the industry.

EconoHábitat recounted what the industry and analysts still see with regret, as well as the positive signs that can be landed by 2023 in favor of greater dynamism.

Increased recruitment of staff

In recent months, the Construction Industry has added more staff to its ranks. According to figures from the National Institute of Statistics and Geography (INEGI), as of last October 479,071 people worked in this sectorthat is, an increase of 3.68% compared to the same month last year.

For Carlos Serrano, BBVA’s chief economist in Mexico, this could mean that builders anticipate a increased activity in the industry, for which they seek to have more staff; however, it may also be thanks to the impulse of the civil works which will be given for the following year.

“We are seeing an increase in the employment in the sector and this, we believe, is that it signals that the builders are seeing that there will be more activity and that is why they are hiring more workers. There has been an increase this year, we believe in part due to workers who will be hired for the flagship works,” Serrano said.

price increase

The geopolitical context has put pressure on the prices of construction supplieswhich for the developers It has meant pausing projects while the situation improves.

In this context, the indicators for November seem to shed light on this inflationary situation in inputs for the building.

According to the National Producer Price Index, corresponding to last November, the Construction subsegment presented a annual inflation of 9.88%which meant a single-digit increase for the first time in 21 months, since previously it had been maintained with double-digit increases.

For Luis Alberto Moreno Gómez Monroy, president of the National Chamber of the Housing Development and Promotion Industry, the war conflict between Russia and Ukraine directly impacts housing construction and in the prices of inputs for their activity, due to the impact on value chains, and although it is seen that the values ​​of some materials have moderated, there are others that are skyrocketing.

“It is not a war that we have just around the corner and even so it is an impact that is seen in materials. Although there is a decrease in the peaks of some such as steel, there are increases such as in the aluminum and copper“Gómez Monroy said.

Other factors and perspectives

A few days ago, Banco de México decided to take the interest rate at a record level of 10.50%in order to spin 13 consecutive increases, which have increased this indicator by 650 basis points since June 2021.

This is certainly a developer impact who take credit for their activity, because said financing It is granted at a short-term variable rate, so any movement impacts the cost of the loan they acquire.

Also, the construction sector has had a brake on private investmentbut the public one has been detonated due to the interest of this government to finish some flagship works next year.

For Francisco Solares, president of the Mexican Chamber of the Construction Industry (CMIC), it is possible that increased investment in infrastructure boost construction activityboth from foreign and domestic sources.

“We hope that next year we will move faster, because in 2022, we are going to get stuck in the construction”highlighted the representative of the CMIC.

For BBVA Mexico, in a context of slowdown in the construction sector, a growth for it in the following year of 1%mainly due to the promotion of civil works.

(With information from Samanta Escobar)