Construction confidence gains ground

Johannesburg – After declining 17 index points in the

fourth quarter of last year, the FNB/BER Civil Confidence Index

Arial;color:#222222"> gained some ground in the first

quarter, rising to 40 from 35.

This, however, is still below the 50 point threshold at

which confidence tips into positive territory.

The current level of the index means that sixty per cent

of respondents are dissatisfied with prevailing business conditions, FNB said

in a statement on Tuesday.

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Statistics

South Africa (Stats SA) calculated the real growth in construction works at 2.3

percent year-on-year in the fourth quarter of 2016, up from 1.3 percent in the

prior quarter.

FNB notes overall investment in the economy declined by

4.4 percent year-on-year in the fourth quarter of 2016. Civil contractors

reported a further improvement in construction activity in the first quarter, which

likely boosted confidence.

“Civil

construction activity held up fairly well towards the end of last year. This

was mainly due to a recovery in mining investment on the back of higher global

commodity prices. This quarters’ survey results suggest a further, albeit

marginal, improvement”, says Jason Muscat, Senior Economic Analyst at

FNB.

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Read also:  Civil construction industry confidence plunges

“However,

mso-hansi-font-family:Calibri;mso-bidi-font-family:Arial;color:#222222"> while the renewed investment by the mining

sector is positive for construction activity, investment by the public sector

remains weak and is expected to be so at least over the short-to-medium term”,

mso-hansi-font-family:Calibri;mso-bidi-font-family:Arial;color:#222222"> adds

Muscat.

The concern regarding activity going forward is shared by

respondents. An increasing number of them cited the lack of new construction

work as a constraint to their business operations, says FNB.

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While

construction activity was somewhat higher in the quarter, conditions in the

sector are still tough. “Tendering

competition remains elevated, which has weighed on profitability”,

mso-hansi-font-family:Calibri;mso-bidi-font-family:Arial;color:#222222;

mso-bidi-font-style:italic"> notes Muscat.

Arial;color:#222222;mso-bidi-font-style:italic"> According

to the survey, overall profitability is at its worst level since 2011.

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FNB/BER Civil Confidence Index: Percentage satisfied

Going

forward, growth in the sector is likely to be limited by the weak outlook for

public sector fixed investment.

BUSINESS REPORT ONLINE