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Cape Town - Confidence in the construction industry rose in the third quarter even though activity slowed unexpectedly, according to the latest FNB/BER construction confidence index.
The index increased by 6 index points, from 45 to 51 in the third quarter of 2013.
This returns the index to the level registered during the first quarter of 2013 and to a level significantly higher than those experienced in the period from 2010 to 2012.
The current level of the index means that half of the respondents were satisfied with prevailing business conditions during the third quarter of 2013.
“Respondents expected a sharp jump in activity following a reasonably good second quarter. Instead, construction activity eased”, said Sizwe Nxedlana, chief economist at FNB.
"Industrial action likely weighed on construction activity during the quarter, particularly on bigger projects such as Eskom’s Medupi and Kusile power stations."
Expenditure on construction projects by general government likely slowed during the quarter, led by municipalities.
According to the National Treasury, municipal capital expenditure surged by just more than R20bn (almost 50% of the R41.6bn spent for the full year) in the second quarter in the run up to the end of their financial year.
Capex is unlikely to have continued at that same pace in the third quarter.
"Private sector construction activity likely continued at a moderate pace," said Nxedlana.
The fall in activity in the third quarter did not greatly impact on profitability, which remained largely unchanged from the second quarter of 2013, according to Nxedlana.
“The ability of firms to maintain profitability despite slowing activity may have helped boost confidence”, said Nxedlana.
Despite their disappointment, respondents remain relatively optimistic about prospects for the fourth quarter of 2013.
“The expectation that business conditions, construction activity and profitability will improve next quarter may also explain the rise in confidence”, said Nxedlana.
"Looking ahead, business conditions, construction activity and profitability are expected to improve over the near term. However, this will depend on capex from the public sector, which has started to slow in recent quarters."
- Fin24
The index increased by 6 index points, from 45 to 51 in the third quarter of 2013.
This returns the index to the level registered during the first quarter of 2013 and to a level significantly higher than those experienced in the period from 2010 to 2012.
The current level of the index means that half of the respondents were satisfied with prevailing business conditions during the third quarter of 2013.
“Respondents expected a sharp jump in activity following a reasonably good second quarter. Instead, construction activity eased”, said Sizwe Nxedlana, chief economist at FNB.
"Industrial action likely weighed on construction activity during the quarter, particularly on bigger projects such as Eskom’s Medupi and Kusile power stations."
Expenditure on construction projects by general government likely slowed during the quarter, led by municipalities.
According to the National Treasury, municipal capital expenditure surged by just more than R20bn (almost 50% of the R41.6bn spent for the full year) in the second quarter in the run up to the end of their financial year.
Capex is unlikely to have continued at that same pace in the third quarter.
"Private sector construction activity likely continued at a moderate pace," said Nxedlana.
The fall in activity in the third quarter did not greatly impact on profitability, which remained largely unchanged from the second quarter of 2013, according to Nxedlana.
“The ability of firms to maintain profitability despite slowing activity may have helped boost confidence”, said Nxedlana.
Despite their disappointment, respondents remain relatively optimistic about prospects for the fourth quarter of 2013.
“The expectation that business conditions, construction activity and profitability will improve next quarter may also explain the rise in confidence”, said Nxedlana.
"Looking ahead, business conditions, construction activity and profitability are expected to improve over the near term. However, this will depend on capex from the public sector, which has started to slow in recent quarters."
- Fin24
