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SA construction activity plunged in January

Total building completions measured in real terms plunged a further -45.9 percent year-on-year (y/y) in January, following December’s -11.2 percent slide, Investec economist Lara Hodes said in a note yesterday. Picture: Cindy Waxa/African News Agency(ANA)

Total building completions measured in real terms plunged a further -45.9 percent year-on-year (y/y) in January, following December’s -11.2 percent slide, Investec economist Lara Hodes said in a note yesterday. Picture: Cindy Waxa/African News Agency(ANA)

Published Mar 19, 2021

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CAPE TOWN - TOTAL building completions measured in real terms plunged a further -45.9 percent year-on-year (y/y) in January, following December’s -11.2 percent slide, Investec economist Lara Hodes said in a note yesterday.

A further -61.7 percent y/y drop in activity in the non-residential sector was largely responsible for January’s poor result. Activity in the residential building space also fell markedly from December’s 5.5 percent y/y lift.

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Hodes said this was consistent with the Bureau for Economic Research’s (BER) latest building survey for the first three months of 2021, which saw confidence among players in the building sector, as measured by the FNB/ BER Building Confidence Index, fall further into depressed territory.

Confidence among non-residential participants fell to 10 points, the second lowest recorded reading since 1999, suggesting 90 percent of respondents in this category were dissatisfied with current conditions, according to the BER.

The lack of new building demand remained a key constraint among players in the non-residential sector, building materials were in shorter supply, with 60 percent of respondents indicating that such shortages were hindering normal business operations. Supply chain hindrances as a result of lockdown restrictions likely exacerbated this.

Hodes said the non-residential pipeline was looking lacklustre and fell by a further -72.3 percent y/y in January, after plummeting by -54 percent y/y in December 2020. This did not bode well for this sector in the near-term.

“Indeed, office vacancy rates remain elevated, worsened by Covid-19 as many businesses have shut their doors, downscaled or transitioned to remote working,” she said.

“Government’s focus on infrastructure development as stated in its reconstruction and recovery plan is positive for the construction industry, however domestic growth remains at risk from heightened rotational load shedding and a slow vaccination rollout,” she said.

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Steel and Engineering Industries Federation of South Africa chief economist Chifipa Mhango said the rolling out of key government infrastructure projects to the value of R791.2bn in the next three fiscal years was also good news for the metals and engineering sectors. |

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