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

The Property Practitioners Bill set to transform the entire property market

Sep 19, 2017
Storme Heath CAF2
Gazetted in March 2017 for comment, the long-awaited Property Practitioners Bill is…

Ballito Junction Regional Mall is crowned the best new shopping centre in South Africa

Sep 22, 2017
Aerial image of Ballito Junction
Ballito Junction Regional Mall has been named the best new shopping centre development in…

Jones Lang LaSalle South Africa 2017Q2 reports reveal useful trends on industrial, office and retail property sectors

Sep 21, 2017
Christian Ulbrich
Real estate consulting firm, JLL South Africa, has released its Q2 2017 research reports…

ADvTech Properties to expand asset base to R6bn by 2022

Sep 26, 2017
Vongani Mbhokota
The properties division of JSE-listed ADvTECH, Africa’s leading private education…

Rode & Associates says Capitalization rates are now firmly on a rising path

Sep 22, 2017
Johan Hattingh
Property, whether directly held or listed, was the darling of South African investors…