CAPE TOWN – The Afrimat Construction Index (ACI) data for the second quarter continued to rise and the sector might be “out of the woods,” albeit off a low base, if the trend continues until the end of the year, economist Dr Roelof Botha said Wednesday.
The ACI is a composite index of the level of activity within the building and construction sectors.
In the second quarter of 2019, the ACI virtually mirrored the performance of total economic activity, recording an identical increase to that of second quarter GDP, namely 3.1 percent (quarter-on-quarter). The latest ACI value however still lags that of a year ago marginally.
Dr Botha said a new growth phase may have started in construction. He said real gross capital formation - growth in the value of production assets - had increased by “a staggering 18 percent quarter-on-quarter, following a declining trend that has lasted for several years.” There was traditionally a 90 percent correlation between capital formation and GDP, he added.
There had also been a 15.8 percent increase in the value of buildings completed. In addition, the latest FNB Property Barometer reported a 90 percent increase in the value of flats and townhouses completed in June, compared with the same month a year previously, an increase in densification which partly explained the continuing decline in the value of building plans passed, as reflected in the ACI.
“The construction sector is not on its knees as commonly thought. It did well in the second quarter compared with the first quarter.,” he said.