Confidence in construction is up, but the industry is still dissatisfied with business conditions.

The FNB/BER Civil Confidence Index gained 13 points to register a level of 41 in Q2 of 2016. This returns the index to more or less the same level as registered in Q4 of 2015.

Despite the higher confidence, the current level of the index indicates that close to 60% of respondents are dissatisfied with prevailing business conditions.

“While lower construction activity weighed on confidence in the first quarter of 2016, the opposite was true in Q2 2016 as activity rebounded nicely,” remarked Jason Muscat, Senior Industry Analyst at FNB.

Data by Statistics South Africa (Stats SA) showed that the real growth in construction works moderated to 6.1% year-on-year in Q1 2016, from 6.6% in Q4 2015. This was broadly in line with last quarter’s survey results.

“If this quarter’s survey results are anything to go by, then it is likely that the growth in construction works picked up again,” said Muscat.

Although confidence was higher this quarter due to the rise in activity, the outlook remains downbeat. Respondents expect somewhat of a slowdown in activity next quarter and the rating of insufficient demand as a business constraint – a proxy for the health of firm’s order books – remained high.

“What we possibly saw this quarter is a combination of election related capital spending as well as a rush to complete projects before the municipal financial year-end in June. This is unlikely to be sustained,” noted Muscat.

Despite the rise in construction activity, profitability came under renewed pressure amid more intense tendering price competition.

Despite higher confidence, with pressure on government finances and concerns regarding the mining sector, this confidence is unlikely to continue.

“One possible source of work is the renewable energy sector. However the extent to which it will buoy the construction sector is uncertain,” concludes Muscat.