Johannesburg - Construction work and overall profit dropped, despite a rise in the civil construction confidence index in the third quarter of 2014, FNB and the Bureau for Economic Research said on Monday.
The FNB/BER civil confidence index rose by four index points to 48 in the third quarter, which followed a cumulative 22 index point fall in the first half of 2014.
There was a noticeable decline in construction activity in the third quarter, but confidence was up.
The rise in confidence was partly due to the expectation that construction activity would rebound in the fourth quarter of 2014.
However, the medium-term outlook was less robust as demand for new construction work was starting to wane, according to the FNB/BER.
Senior industry analyst at FNB Economics, Jason Muscat, said the current level of the index suggested that close to half of respondents were satisfied with prevailing business confidence.
“Confidence was higher despite a marked fall in construction activity,” Muscat said in a statement.
“This suggests that it is unlikely that the growth in construction work by general government, which has buoyed the sector over the past few quarters, continued at the same pace this quarter.”
He said profitability came under pressure not only from the decline in construction work, but also because of a noticeable rise in tendering competition.
Respondents expected construction activity to rebound in the fourth quarter of 2014, which partly explained the rise in confidence.
“Respondents have indicated that demand for new construction work is becoming scarcer,” said Muscat. - Sapa