Wednesday, 22 June 2016 20:05

Construction activity rebounded unexpectedly, boosting confidence during the quarter

Written by
Rate this item
(0 votes)

The FNB/BER Civil Confidence Index gained 13 points to register a level of 41 in 2Q2016.

Jason_Muscat_FNB

This returns the index to more or less the same level as registered in 4Q2015. Despite the higher confidence, the current level of the index indicates that close to 60% of respondents are dissatisfied with prevailing business conditions.

“While lower construction activity weighed on confidence in the first quarter of 2016, the opposite was true in 2Q2016 as activity rebounded nicely,” remarked Jason Muscat, Senior Industry Analyst at FNB. Data by Statistics South Africa (Stats SA) showed that the real growth in construction works moderated to 6.1% year-on-year (y-o-y) in 1Q2016, from 6.6% in 4Q2015. This was broadly in line with last quarter’s survey results. “If this quarter’s survey results are anything to go by, then it is likely that the growth in construction works picked up again,” said Muscat.

Although confidence was higher this quarter due to the rise in activity, the outlook remains downbeat. Respondents expect somewhat of a slowdown in activity next quarter and the rating of insufficient demand as a business constraint - a proxy for the health of firm’s order books – remained high. “What we possibly saw this quarter, is a combination of election related capital spending as well as a rush to complete projects before the municipal financial year-end in June. This is unlikely to be sustained”, noted Muscat.

Despite the rise in construction activity, profitability came under renewed pressure amid more intense tendering price competition.

According to the survey results, construction activity rebounded nicely in 2Q2016. Consequently, confidence was higher. However, with pressure on government finances and concerns regarding the mining sector, this is unlikely to continue. “One possible source of work is the renewable energy sector. However, the extent to which it will buoy the construction sector is uncertain”, said Muscat. 

Last modified on Friday, 24 June 2016 01:16

Most Popular

Supporting solar energy solutions in South Africa

May 29, 2017
Parabolic Trough Solar Thermal Electric Power Plant
As part of the government’s Renewable Energy IPP Procurement Programme (REIPPP), that…

Echo Polska Properties completes acquisition of Warsaw retail development

Jun 01, 2017
Galeria Młociny
Echo Polska Properties, the dual JSE and LuxSE listed ‘pure Polish property play’…

How junk status will affect the property market

Jun 08, 2017
Jacques van Embden
News broke last week that The Fitch ratings agency could affirm SA’s rand-denominated…

Breathing new life into the CBD

May 29, 2017
Gustav Voigts Shopping Centre
Upmarket development in Windhoek’s central business district (CBD) is on the rise and has…

Green Building Council South Afica inspires South Africans to connect with nature on World Environment Day

May 30, 2017
Hotel Verde eco pool smaller
The Green Building Council SA (GBCSA) is celebrating World Environment Day on 5 June with…