Economics: Housing resurgence is limited by credit scarcity while GFI in construction of trade-related capacity dominates the private component
Much of the dynamism that we have been witnessing in the construction sector is explained by the latest rise in spending on public works, especially with what the current administration is pumping into its flagship railroad projects, as we noted in our January 8 Outlook. However, in recent months there have also been steep increases in private construction activity, which while not on the scale of the atypical levels of the public sector, are consistent with the economic dynamics of the last year.
Much of the growth in the private sector has taken the form of construction of industrial, service and commercial buildings being built in anticipation of an extension of the positive trend of foreign trade as companies look to expand their production capacity. In the last two months a long beleaguered housing sector has been picking up considerable steam at a time of greater employment and higher formal sector wages, but this segment still faces several obstacles to achieving the degree of consistent growth that might allow it to recover from the negative trend experienced since the 2009 crisis. One of the obstacles to housing development is the very limited availability of credit at a time when there has been a shortfall in the mortgage loans being issued by Infonavit, the public institution that accounts for most of the country’s housing credit portfolio, as commercial banks and other lenders have failed to compensate for the institute's slack.
In this week’s Outlook, we provide a more detailed analysis of the private construction component and its prospects for this year.
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