Saturday, 05 April 2014 15:30

Atypical Construction Industry Cycle

Dr Snyman, Industry adviser and University of Cape Town lecturer has described the current construction industry cycle as "atypical", with research suggesting that the sector remains in a post-recessionary recovery phase. He explained that studies have found that the recovery phase of the construction sector are occurring after a financial crisis, is more modest and protracted than that following a 'normal' cyclical downswing, and we are currently in this slow recovery phase.

"However, business confidence appears to be rising, so it's a good news/bad news story,"" he told delegates at a Building Research Strategy Consulting Unit forum on Friday.

Snyman referred to research by former First National Bank group economist Dr Johan Cloete, which stated that an upswing in economic growth, which largely coincided with an expansion in building and construction activities, tended to be stronger and more prolonged.
Similarly, economic downswings that occurred in conjunction with a downtick in construction activity tended to be more intense and last longer, Snyman added.

However, based on a composite indicator that he had developed over 20 years using 24 business confidence indicators, Snyman believed an upswing in the "business mood" of construction industry players could be foreshadowing a 'modest' revival in the sector.

"If you combine the business sentiment of those in the industry, there is a modest uptick. This is a leading indicator and, as such, an increase in business confidence often pre-empts an increase in overall sector performance. While constraints in the industry still exist, in nominal terms, there's a clear indication of cyclical revival," he said.