Construction confidence in marked drop

CONSTRUCTION confidence‚ as measured by the FNB/BER construction confidence index‚ has fallen to 55 points in the first quarter of the year after rising to 66 points in the fourth quarter of last year.

The latest index‚ released on Wednesday‚ says the fall is likely to be due to a lower than expected increase in construction activity and a “mild deterioration in profitability” during the quarter.

But the index showed the outlook for the construction sector remained fairly upbeat‚ with a sharp increase in construction work and profitability expected in the second quarter.

“However‚ a more robust increase in construction work was expected than actually realised. This disappointment weighed on confidence‚ even though the pace of construction activity itself rose‚” Sizwe Nxedlana‚ chief economist at FNB, said. “Profitability has been moving within a very narrow band over the past year.”

The drop in the index comes as South Africa’s steel sector‚ whose biggest market is construction‚ continues to teeter dangerously. Earlier this month‚ the country’s second-largest steel maker‚ Evraz Highveld Steel & Vanadium‚ reiterated there were fears over it remaining a going concern‚ causing the share to drop by 30%.

Since then Duro Pressings‚ the largest maker of steel and aluminium windows and doors in South Africa‚ has gone into liquidation. And global miner BHP Billiton is in talks with unions over the possible closure of most operations at its Bayside aluminium smelter in Richards Bay‚ KwaZulu-Natal. – BDlive