FNB and the Bureau for Economic Research have continued to note an uptick in civil construction work in the second quarter of the year, which builds on the improvement registered since mid-2022.

However, despite this uptick in construction activity, the Civil Confidence Index (CCI) edged lower to 41 in the second quarter, compared with a level of 42 in the first quarter.

The long-term average level for the CCI has been 42.

The current level of the index implies that slightly less than 60% of respondents are dissatisfied with prevailing business conditions. A deterioration in overall profitability likely dampened respondents’ sentiment.

Positively, the index measuring activity growth was at its highest since 2007 in the second quarter of the year, which makes FNB senior economist Siphamandla Mkhwanazi cautiously optimistic about the construction sector and how activity has grown in the past few quarters.

“The latest results provide an even stronger signal that civil contractors are noticeably busier than they have been in a while. Part of this is owing to increased public sector projects related to road and water infrastructure.

“Crucially, the development of alternative energy infrastructure by the private sector seems to be providing the bulk of the boost,” he explains.

Statistics South Africa says the real value of construction work increased by 5.7% year-on-year in the first quarter, from 4.8% year-on-year growth in the fourth quarter of last year.

Mkhwanazi says respondents are optimistic about construction activity prospects for the third quarter of the year, despite profitability having worsened in the year-to-date.

“Compared to the robust improvement in construction work, overall profitability disappointed. This could be due to several factors, including continued margin pressure, which is not uncommon so early in a recovery, and increased input costs,” he adds.

Overall, the deterioration in sentiment masks a significant increase in activity, led by private sector investment in energy generation. Importantly, the CCI survey indicates that work will remain well supported into the next quarter.