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Construction picks up but pressures remain

Cape Town - Construction activity has rebounded unexpectedly, boosting confidence during the second quarter of the year, but the outlook remains downbeat, according to the FNB/BER Civil Confidence Index.

The index gained 13 points to register a level of 41 in the second quarter of 2016, taking it to more or less the same level registered in the last quarter of last year.

However, despite the higher confidence levels, close to 60% of respondents are dissatisfied with prevailing business conditions.

“What we possibly saw this quarter, is a combination of election related capital spending as well as a rush to complete projects before the municipal financial year-end in June”, said FNB senior industry analyst Jason Muscat.

However, he said with pressure on government finances and concerns regarding the mining sector, this is unlikely to continue.  

Despite the rise in construction activity, profitability also came under renewed pressure amid more intense tendering price competition.

“One possible source of work is the renewable energy sector. However, the extent to which it will buoy the construction sector is uncertain,” said Muscat.

Data by Statistics South Africa showed that the real growth in construction works moderated to 6.1% year-on-year in the first quarter of 2016, from 6.6% in the last quarter of 2015. This was broadly in line with FNB's last quarter’s survey results.

“If this quarter’s survey results are anything to go by, then it is likely that the growth in construction works picked up again,” said Muscat.

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