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Higher demand for new construction work

Johannesburg - Civil contractor confidence was higher in the fourth quarter of 2014 despite continued pressure on actual construction work and profitability, according to the The FNB/BER Civil Confidence Index released on Wednesday.

The rise in confidence can partly be explained by respondents’ expectation that construction activity will improve in the first quarter of 2015.

In addition, the medium term outlook is also slightly more upbeat with demand for new construction work starting to recover.

READ: Construction still reeling from 2013 collusion


(Source: Stellenbosch University)

The current level of the index suggests that more than half of the respondents are satisfied with prevailing business conditions.

After rising by 4 points in the third quarter of 2014, index increased by a further 11 points to 59 in fourth quarter of 2014.

“Once again the rise in confidence was not entirely supported by underlying fundamentals. Construction activity and profitability, although slightly higher than in third quarter of 2014, was still lower than a year ago,” said Jason Muscat, senior industry analyst at FNB.

READ: Construction in SA slows


(Source: BER Stellenbosch University)

According to the SA Reserve Bank (Sarb), the growth in the real value of construction work eased to 8.4% year-on-year (y-o-y) in the third quarter of 2014, from 17.4% in the second quarter of 2014.

On a quarterly basis construction work declined by 0.7%.

“The survey results for the fourth quarter of 2014 suggest a further slowdown in the annual growth in construction work,” noted Muscat.

“One factor that may, however, have buoyed confidence is the improved demand for new construction work."

This is reflected in both the decline in the rating of new construction work as a business constraint, which is now as close to a 6-year low, and in respondents' expectation of higher construction activity next quarter.

However, the better demand may not translate into actual work. According to Muscat “continued delays with key infrastructure projects as well as difficulties at some provinces and municipalities to effect capital expenditure remain important risks.”

ALSO READ: Surprise dip in construction confidence


(Source: BER Stellenbosch University)

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