Johannesburg - Confidence in the civil construction industry has fallen to levels last seen during 2001, reflecting the effect of the recession and a slowdown in building activity.
According to the Bureau of Economic Research and First National Bank's (FNB's) civil Construction Confidence Index for the third quarter, confidence has dropped by 19 index points to 29 from an index value of 48 in the second quarter of 2009. This followed on a decline of 12 index points between the first and second quarters of the year.
"The growth in construction activity executed during the third quarter substantially underperformed expectations of survey respondents," said FNB chief economist Cees Bruggemans, adding that labour retrenchments escalated as a result.
Survey respondents said the decline in private sector demand translated into the deterioration of construction workloads. The slow pace of government capital expenditure programmes at local authority level contributed to the slowdown.
Tendering competition remained tight during the third quarter, with 83% of respondents indicating that competition was more intense than in the same quarter a year ago. As a result, margins deteriorated and a rising percentage of respondents reported a weakening in profitability growth.
However, the survey showed that despite concern over the business outlook for the fourth quarter of 2009, no further major deterioration is expected.