This spring, for the second time in less than a year, China floated bonds to fund road construction and other infrastructure projects -- and give a boost to its slumping economy. In dramatic contrast, half a world away, the U.S. economy has continued to outperform expectations, and the slump in construction activity that the Northeast experienced in the first two months of 1999 has not spread to other regions. Indeed, as midyear nears, the global construction industry story is essentially a tale of two communities: the U.S. (doing quite well) and the rest of the world (lagging well behind). And that assessment is significant not only as a market measure for contractors and the companies that make construction equipment, but also as an important economic indicator for business generally. With more than $700 billion in construction spending expected this year, the U.S. remains the largest single-country component of the $3 trillion global construction market. During this year's first calendar quarter, $143.3 billion worth of construction was put in place, 10% above the $130.1 billion recorded in 1998's first three months, reports the U.S. Commerce Dept.'s Bureau of the Census. In March alone, construction was being put in place at an annual rate of $708.1 billion, only slightly higher than February's $704.6 billion rate, but 11% better than the March 1998 mark of $639.9 billion. In April, U.S. construction spending took an unexpected drop. But the figures for this month and next are the ones that David M. Bush will be watching with particular interest. If they sustain the respectable growth rates of most of the last several months, 1999 "probably will have a fairly strong finish," predicts the president and CEO of Adena Corp., a Mansfield, Ohio-based builder of industrial, commercial, and extended-health-care facilities. "After 1998, I really felt that we'd see a little back-off in the retail and commercial" market segments. But "they're not backing off," says Bush. For example, neighborhood strip malls continue to rise -- as do multiscreen movie theaters, observes Bush, who also is president of Associated Builders & Contractors Inc., a merit-shop construction group based in Arlington, Va. Robert E. Fee has a slightly different take on U.S. construction, expecting essentially a flat market this year and a downturn, particularly in commercial building, in the year 2000. "That's the bad news. The good news is that many of the market segments that we work within are on the rise," says Fee, president and CEO of New York-based Turner Construction Co. and president and COO of Turner Corp., its parent holding company. Education, health care, airports, and public-sector projects such as justice centers and correctional facilities -- market segments in which Turner claims to be No. 1, No. 2, or No. 3 -- are "still rising in double digits," he says. In California education remains "the boom market," says Donald W. Dreusike, senior vice president and principal-in-charge of Bovis Construction Corp.'s Los Angeles office. Construction of facilities for kids from kindergarten through high school is "extremely hot," thanks in part to the nearly $10 billion in construction bond issues that have been approved in the last several years, he says. Dreusike adds that there's "a lot of activity" among California's colleges, universities, and junior colleges--although the pace of construction is not quite as high as it is for the K-12 crowd. Meanwhile, an upgrading of health-care facilities could produce the Golden State's next construction boom. Under terms of California Senate Bill 1953, enacted in 1994, hospitals that don't meet seismic standards and pose a "significant" threat to life and safety must be retrofitted -- or removed from acute-care services -- by the year 2008. And by the year 2030, all hospital buildings in the state must be in compliance. "It's going to be huge," says Dreusike. "The major medical centers are looking at it seriously. They're starting to create funding sources for it." Low unemployment, low interest rates, low inflation, and high consumer confidence are behind the impressive performance of U.S. housing markets, says Yorgos Papatheodorou, manager of market development for Lockwood Greene Engineers Inc., a Spartanburg, S.C.-based consulting, design, and construction company. What's more, "people are feeling rich because of the stock-market boom," he adds. "Put it all together, and you have very, very strong housing markets." However, "If the consumer-led boom . . . starts sliding there will be pretty serious consequences for housing," he cautions. Indeed, residential construction, which trended up during 1999's first calendar quarter to a $240 billion annual rate in March, is the construction industry's most interest-rate-sensitive segment; when home mortgage interest rates rise, the residential construction rate tends to fall. And eventually all construction is sensitive to interest rates because there's always "some sort of financing," emphasizes Turner's Fee. Nevertheless, there's little immediate cause for concern on either the residential or nonresidential construction fronts in the U.S. At least in the Midwest, mortgage interest rates are down a bit after nudging up earlier in the year, notes Adena Corp.'s Bush. And Merrill Lynch & Co. is projecting that the U.S. prime interest rate will remain flat at 7.75% through the first half of next year, a prospect that will tend to keep corporate borrowers from canceling or postponing building projects for purely finance reasons. Education construction is now "probably the least interest-rate-sensitive area," suggests Turner's Fee, "because the states have budget surpluses, and they're able to [funnel] those into schools." While construction companies can cite numerous segments of strength around the U.S., pretty much the reverse is the case elsewhere in the world. "There are probably more trouble spots than pockets of real economic activity," says Nick Billotti, president and CEO of Turner Steiner International LLC, a Turner Corp. affiliate jointly owned with Zurich-based Karl Steiner Holdings AG. "Depressed" is the term Billotti uses to describe the general building market in Japan, South Korea, Malaysia, Indonesia, and most of the rest of Asia. However, with the emphasis on retail and leisure facilities, light manufacturing, and high-tech operations, Taiwan, he says, is an exception -- although a loss of "investor confidence has resulted in a marked slowdown of new projects, many of which have been in the planning stage for the last 12 months to 18 months." Singapore, working to establish itself as southeast Asia's technology center, is another exception -- although "the [construction] market there has certainly been affected by the [poor] macroeconomics of the region," Billotti notes. "I wouldn't say that you'd find a lot of commercial office-building-type activity there. Nor would you find much activity by way of new hotel construction or retail. Those areas of the market are pretty well saturated." Indonesia is "still a problem. They still have political instability . . . ," judges Lockwood Greene's Papatheodorou. In contrast, South Korea and Thailand, two countries hardest hit by the Asian financial crisis that began in July 1997, seem to have turned the corner, he says. "Whether that will really bring growth in construction spending is not yet clear." China "is shooting itself in the foot by stiffing some of its creditors right now. I know none of my clients are terribly interested in getting involved there because they feel there's a tremendous amount of upfront work and no assurance, even if you ink a deal, that it'll be honored," says Robert Vitale, a partner in the New York office of Cadwalader, Wickersham & Taft and chairman of the law firm's project finance department. In Europe, 1999 will see "a pretty small increase," likely 1.5%, in construction spending to about $797 billion (745 billion euros), believes Papatheodorou. The reasons: With the exception of Ireland, the population is not replacing itself. And this coupled with strict zoning laws that stifle single-family-home construction, historically high unemployment, and relatively slow overall economic growth is holding down housing demand, he says. And while commercial, entertainment, and retail development is doing "O.K.," spending on large public projects will "vary a lot from country to country" in Western Europe, he notes. The greatest amount of activity will be in Greece, Portugal, Spain, and Ireland, countries that are receiving funds from the European Union to improve their infrastructure. Meanwhile, there'll be some growth in European industrial construction. "But I don't expect that we are going to see the kind of capital-spending boom that we saw in the United States between 1993 and 1997," says Papatheodorou. Poland and Hungary are doing best in central and eastern Europe, an area where he expects construction to increase "maybe 6%" during the next year or two. "Residential-construction spending should grow perhaps 10%. [And] the reason for that is [years] of pent-up demand for housing," especially in the cities. In the Middle East, where until recently lowered global demand for oil and remarkably low crude-oil prices have constrained building, Egypt is remarkably active. "It is a market that is growing rapidly" in several sectors, says Turner's Billotti. Among them: residential (Turner is working on a complex just outside Cairo), hotels (especially along the Red Sea), and light manufacturing (near Port Said and Six October City, a government-designated industrial zone). In Africa, demographics will drive "respectable growth" in the north, with more bottling plants and consumer-goods production facilities being built, says Papatheodorou. South of the Arabic-speaking countries, however, political instability in such places as Congo discourages investment and construction. Yet Nigeria, rid of its governing generals, could prove to be a pleasant surprise, the Lockwood Greene analyst surmises. "As long as the world can be convinced that [its] money is safe there, I expect there will be a lot of investment in Nigeria." In South Africa the fundamental issue affecting construction is not economic, he says. It is "whether there is an orderly succession to [outgoing President Nelson] Mandela." In Latin America, construction In Brazil "could easily shrink 10% or more this year as the region's largest economy contracts close to 4%, Papatheodorou expects. But over the long term, he is bullish particularly on Brazil and Argentina.