Publications
Partners
Johannesburg - A more robust increase in construction work was expected than was actually realised during the first quarter of 2014, according to Sizwe Nxedlana, chief economist at FNB.
This disappointment likely weighed on confidence, even though the pace of construction activity itself rose, he said on Wednesday.
The FNB/BER construction confidence index fell by 11 index points, from 66 to 55 in the first quarter.
"Even though confidence decreased noticeably, the current level of the index still means that the majority of respondents were satisfied with prevailing business conditions during the first quarter," said Nxedlana.
"A moderate increase in construction work during the quarter helped keep confidence above the neutral 50-index point level."
During the quarter construction work likely came from the private sector, despite industrial action in the mining sector, he said.
It is also possible that the growth in capital expenditure (capex) by municipalities remained strong, continuing the performance registered during the second half of last year.
"This in all likelihood boosted overall general government capex. In contrast, the growth in provincial capex was probably flat," said Nxedlana.
The growth in construction work from public corporations likely remained stable.
Decline in profitability
A slight deterioration in profitability may also have contributed to the decline in confidence.
The sector, therefore, remains under pressure.
“Profitability has been moving within a very narrow band over the past year, while construction work has been showing a more marked increase," said Nxedlana.
"This continued into the first quarter of 2014 and suggests that, although work has risen, firms still face some difficulties.”
Despite their disappointment in the actual results this quarter, respondents remain upbeat about prospects for the second quarter of 2014.
Nxedlana cautions, however, that respondents’ expectations for the second quarter may be too optimistic.
This disappointment likely weighed on confidence, even though the pace of construction activity itself rose, he said on Wednesday.
The FNB/BER construction confidence index fell by 11 index points, from 66 to 55 in the first quarter.
"Even though confidence decreased noticeably, the current level of the index still means that the majority of respondents were satisfied with prevailing business conditions during the first quarter," said Nxedlana.
"A moderate increase in construction work during the quarter helped keep confidence above the neutral 50-index point level."
During the quarter construction work likely came from the private sector, despite industrial action in the mining sector, he said.
It is also possible that the growth in capital expenditure (capex) by municipalities remained strong, continuing the performance registered during the second half of last year.
"This in all likelihood boosted overall general government capex. In contrast, the growth in provincial capex was probably flat," said Nxedlana.
The growth in construction work from public corporations likely remained stable.
Decline in profitability
A slight deterioration in profitability may also have contributed to the decline in confidence.
The sector, therefore, remains under pressure.
“Profitability has been moving within a very narrow band over the past year, while construction work has been showing a more marked increase," said Nxedlana.
"This continued into the first quarter of 2014 and suggests that, although work has risen, firms still face some difficulties.”
Despite their disappointment in the actual results this quarter, respondents remain upbeat about prospects for the second quarter of 2014.
Nxedlana cautions, however, that respondents’ expectations for the second quarter may be too optimistic.
