Civil construction index rises for third quarter, but most experiencing work shortage
The FNB and Bureau of Economic Research Civil Confidence Index rose by five points to 21 in the first quarter of this year.
This was the third consecutive quarterly increase, but the current index level means that the vast majority (close to 80%) of respondents are dissatisfied with prevailing business conditions.
“It is encouraging that activity continued to gather momentum this quarter. The concern, however, is the trajectory for the rest of the year.
"Despite some anecdotal evidence to the contrary, too many civil contractors are still experiencing a shortage of new work,” says FNB senior economist Siphamandla Mkhwanazi.
The index increase came mainly from an improvement in activity. Most of the other indicators remained at relatively weak levels.
“Before the second quarter of 2020, we noted that there was a latent recovery in civil construction activity. Then came the pandemic which negatively affected the civil construction sector, even more so than the rest of the economy.
"Promisingly, we are now in a similar position as a year ago, with activity, cautiously and off a very low base, starting to improve,” says Mkhwanazi.
Other indicators, however, weighed on confidence. Despite the uptick in activity, profitability deteriorated and the pipeline for new work remains thin.
“A number of large construction companies have shared that there seems to be more tendering activity, particularly on the road infrastructure front, but also in mining and renewable energy. While these results do not necessarily contradict that, it does suggest that this improvement in tendering activity is not the experience of most contractors,” notes Mkhwanazi.
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