FNB/BER survey says South African construction is recovering
By Cees Bruggemans, Chief Economist of FNB.
The FNB/BER construction confidence index edged lower from 23 in 2Q11 to 21 in 3Q11. This is the same level as in 1Q11 and much lower compared to the average level of 84 in 2006.
The confidence index can vary between a maximum of 100 (which indicates that all respondents were satisfied with prevailing business conditions) and a minimum of zero (indicating that all respondents were unsatisfied). A level of 50 indicates that the respondents are equally divided between those satisfied and dissatisfied. The current reading of 21, therefore, indicates that the bulk of respondents remained dissatisfied with prevailing business conditions.
Although confidence remained low, other indicators show that the construction sector continued to improve.
In conclusion: A number of indicators showed that the recovery in the construction sector continued in the 3Q11. However, confidence remained low, as absolute activity levels remained unsatisfactory and uncertainty about prospects may have remained considerable.
Respondents expect the recovery to gain further momentum in 4Q11. More work is likely to flow from local governments, because it is easier to make decisions now that the local election is completed. National Treasury’s monitoring of local governments’ budgeted capital spending may also advance construction activity.
However, a number of developments may cause respondents’ optimistic expectations not to be fully realised and that the recovery does not continue in a straight line in the next 6 months or so.
In all, the short-term prospects for the civil construction are brighter given indications of recovery in activity, although a number of head winds may see the recovery not continue in a straight line.
Visit the FNB Economics website at www.fnb.co.za/economics and consider using our free e-mail service.
FNB/BER Civil Confidence Index
Growth in construction activity
Source: BER Stellenbosch
Source: Cees Bruggemans, FNB, October 11, 2011.
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