Construction confidence up

The construction confidence index rose to its highest level since the end of 2009 in the second quarter of 2012‚ suggesting that the recovery is gaining momentum with construction activity in particular picking up noticeably‚ according to the latest FNB/Bereau For Economic Research survey.

The construction confidence index rose for the third consecutive quarter‚ from 34 index points to 38 in the period under review.

Despite this‚ there is still reason to believe that this recovery remains fragile‚ the survey cautioned.

This construction activity stemmed from a number of sources‚ which included robust capital expenditure from provincial governments. Public corporations saw an increase in civil construction activity with new projects from the Trans-Caledon Tunnel Authority and Airports Company SA in particular coming on line.

However‚ construction activity from the private sector likely contributed less with mining production slowing and some mining firms holding back on expansion plans.

As a result of the uptick in activity‚ firms have been able to further raise tendering prices providing additional relief to their balance sheets. Construction employment levels increased modestly in the review period.

Overall profitability also improved. However‚ the increase in profitability was lower than the higher prices and increased activity would have suggested. “This is indicative of the type of rising cost pressures civil contractors are faced with‚” said Cees Bruggemans‚ chief economist of FNB.

In addition to rising costs‚ respondents remained dissatisfied with the volume of new construction work available and they therefore still rated it as a significant constraint. Also‚ the lack of skilled labour is becoming even more of a concern and has increasingly been mentioned by the industry.