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Construction sentiment ticks up despite less activity
The Civil Confidence Index compiled by FNB and the Bureau for Economic Research has increased to a level of 43 in the third quarter of the year from 41 in the second quarter and 45 in the first quarter.
The current reading means that nearly 55% of respondents to the index survey are dissatisfied with prevailing business conditions in the civil construction sector.
According to FNB senior economist Siphamandla Mkhwanazi the business mood in the sector improved despite a marked weakness in activity growth, which is likely owing to base effects, with actual spending on civil construction unlikely to be as downbeat.
Mkhwanazi explains that, while the activity index weakened considerably in the third quarter compared with the prior quarter, it remains close to its long-term average.
Importantly, the index has held relatively high levels in recent quarters.
Since it reflects yearly growth, base effects may explain the lower reading, however, if this weaker level persists over the next two or three quarters, it would be cause for concern.
Statistics South Africa finds the real value of construction works decreased by 0.3% year-on-year in the second quarter, from a 3.2% decline in the first quarter.
The Civil Confidence Index survey results suggest a slightly more pronounced decrease in real value of construction works in the third quarter; however, the civil construction sector is on track for a much-improved performance in the full year, compared with 2024.
Respondents’ own expectations for work next quarter and the rating of insufficient new demand as a constraint to business operations (a proxy for order books) reiterate the stance that the availability of work is not yet a major concern.
Although the latter registered its highest level since the end of 2022 at 71, it merely returned to its long-term average.