Construction Monitor August 2022

There was a mixed bags of economic signals released in the month of August.  GDP contracted in the 2^nd quarter of 2022, with the construction sector seen as the worst sector across all the ten sectors monitored, currently still 24 percent lower compared to (already dismal) pre-pandemic levels.   With only a few data points for July (the first month of the 3^rd quarter), manufacturing and vehicle sales performed surprisingly well, but business activity and new sales orders (according to the Purchasers Managers Index) weakened. There was hardly an improvement in wholesale of construction materials, while retail sales (hardware, paint and glass) declined for the 6^th consecutive month.  The lower oil price could have offered some relief, but a weaker currency reduces the economic impact.   Government again announced its billion rand infrastructure programme in August, but it is really not anything to get too excited about as it will not support a recovery or revival in the construction sector by any means. The participation of the private sector in key economic infrastructure developments, like the ports (Transnet) and renewable energy programmes, is a step in the right direction (even though the financial impact of the renewable energy programmes on the civil industry is minimal), its economic benefit is much more profound.  Even though the construction sector reported dismal conditions in the 2^nd quarter, the construction labour force expanded by 104 000 job opportunities, although this could simply be a statistical correction considering the poor response rates achieved in 2021 by Stats SA in the survey.  The listed sector active in the construction industry also faced a difficult month, with 77 percent of the companies included in our activity index, reporting weaker market capitalisation values in August.   There was nothing overly exciting in terms of approvals for private sector building construction, with the strong increase in approvals for industrial developments starting to taper off.  July was a bad month for the civil industry, with lower values of projects awarded, a drop in tender activity and an increase in postponements. However, on the upside the estimated value of tenders released in July was at the highest level since October 2021 due to the release of several Grade 9 projects out to tender.