Civil construction confidence drops slightly in 1Q2008

The FNB Civil Construction Confidence Index, compiled by the Bureau of Economic Research (BER), declined slightly from a previous survey level of 83 to 79 in 1Q2008.

Cees Bruggemans, Chief Economist of First National Bank, said that overall business conditions remain very favourable in the civil construction industry. The slight moderation in business confidence could, amongst others, be related to the impact of the current electricity crisis, project delays particular at the municipal level where notable project skills shortages are evident and a slowdown in township development work stemming from the downswing in the private residential building cycle.

According to Bruggemans the growth in civil construction activity during 1Q2008 turned out below expectations expressed by respondents at the time of the previous survey. No further weakening in construction activity levels were, however, expected during 2Q2008.

Tendering competition increased during the 1Q2008, reflecting the moderation in the current level of construction activity reported by respondents to the survey. Bruggemans noted that notwithstanding the rise in tendering competition, margins of respondents and thus the growth in the profitability of companies responding to the survey was not unduly adversely affected.

Growth in employment continued during the survey quarter with the availability of skilled labour remaining a major constraint hampering the construction operations of respondents to the survey.

As far as prospects for Q22008 are concerned, expectations are that business conditions in the civil construction market are unlikely to deteriorate further.
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