Industry adviser and University of Cape Town lecturer Dr Johan Snyman has described the current construction industry cycle as “atypical”, with research suggesting that the sector remains in a post-recessionary recovery phase.

“Studies have found that the recovery phase [of the construction sector] occurring after a financial crisis is more modest and protracted than that following a ‘normal’ cyclical downswing, and we are currently in this [slow recovery phase].

“However, business confidence appears to be rising, so it's a good news/bad news story,” he told delegates at a Building Research Strategy Consulting Unit forum on Friday.

Snyman referred to research by former First National Bank group economist Dr Johan Cloete, which stated that an upswing in economic growth, which largely coincided with an expansion in building and construction activities, tended to be stronger and more prolonged.

“This is largely owing to the multiplier effect of construction, particularly in terms of labour. When more people are employed and are earning money, the country’s consumer base and buying power also increases,” he said.

Similarly, economic downswings that occurred in conjunction with a downtick in construction activity tended to be more intense and last longer, Snyman added.

However, based on a composite indicator that he had developed over 20 years using 24 business confidence indicators, Snyman believed an upswing in the “business mood” of construction industry players could be foreshadowing a ‘modest’ revival in the sector.

“If you combine the business sentiment of those in the industry, there is a modest uptick. This is a leading indicator and, as such, an increase in business confidence often pre-empts an increase in overall sector performance. While constraints in the industry still exist, in nominal terms, there’s a clear indication of cyclical revival, ” he said.

Snyman’s comments came some two weeks after a survey conducted by Rand Merchant Bank (RMB) and the Bureau for Economic Research (BER) indicated that six out of ten respondents were unhappy with prevailing business conditions.

Engineering News Online reported earlier this month that the RMB/BER first quarter Business Confidence Index (BCI) fell by two points to 41 during the first three months of the year, a move that more than offset the one point increase during the last quarter of 2013.

Tellingly, sentiment among building contractors and manufacturers continued to improve gradually, RMB chief economist Ettienne le Roux said.

“The rise in confidence of building contractors and manufacturers, accompanied with the deterioration in the business mood of trade sectors, is indicative of the source of economic growth increasingly shifting from consumption to production.

“Such sector rotation sits at the core of what is a necessary adjustment to help narrow South Africa's large current account deficit and [in doing so] lay the foundation for faster, more sustainable growth in the future,” said Le Roux.