Despite a decline in construction activity, confidence in the civil construction industry, as measured by the First National Bank (FNB) and Bureau for Economic Research (BER) civil confidence index, increased in the third quarter of the year, FNB said in late September.
Following a cumulative 22 index point fall in the first half of 2014, the FNB/BER civil confidence index rose by four index points to 48 in the third quarter, indicating that nearly half of the respondents were satisfied with the prevailing business conditions.
“Confidence was higher despite a marked fall in construction activity, which suggests that it is unlikely that the growth in construction work by government, which had buoyed the sector over the past few quarters, continued at the same pace this quarter,” FNB Economics senior industry analyst Jason Muscat commented.
FNB noted that, according to the National Treasury, capital expenditure (capex) by provinces rose by a yearly rate of 19.1% between April and June, while the rise in municipal capex was more subdued at 1%.
“Firm profitability also came under pressure,” Muscat noted, adding that this was, however, not only as a result of the decline in construction work, but also owing to a noticeable rise in tendering competition.
Meanwhile, FNB said the rise in third- quarter confidence could partially be attributed to an expectation that construction activity would rebound during the fourth quarter.
However, Muscat noted that the medium-term prospects for the sector remained subdued.
“Respondents have indicated that demand for new construction work is becoming scarcer.”