CNI indicators ISSN 2317-7322 • Year 8 • Number 12 • December … · 2018. 5. 20. · 6 Construction Industry Survey ISSN 2317-7322 Year 8 Number 12 December 2017 The investment

The expectation indicators consolidated their upward trend in January and point to a more optimistic outlook for the construction industry. The business confidence indicator reinforces this scenario as it reached its highest point since February 2013.

The quarterly indices indicate an improvement in financial conditions, with entrepreneurs showing less dissatisfaction with their profit margins and financial situation. Among the main problems indicated by companies are a high tax

Entrepreneurs start the year on a more optimistic note

burden, insufficient domestic demand, and lack of working capital.

The activity indicators experienced a decline in December on a month-over-month basis. The frequent rainfalls in December have a direct impact on the sector’s production, which generally leads to more negative results in the month. However, it is worth noting that the decline in activity and employment levels at the end of 2017 was less pronounced than in recent years.

Expectation indices* Diffusion indices (0-100)

50

Increase

Decrease

SEP JAN

2018

SEPJAN

2016

MAY JAN

2017

MAY

56.2

55.0

55.7

54.0

* The indices vary in the 0-100 interval. Figures above 50 points indicate an expected growth.

Activity levels New developments and services Purchase of inputs and raw materials Number of employees Dividing line

CONSTRUCTION INDUSTRY SURVEY

CNI indicatorsISSN 2317-7322 • Year 8 • Number 12 • December 2017

2

Construction Industry SurveyISSN 2317-7322 • Year 8 • Number 12 • December 2017

CONSTRUCTION INDUSTRY PERFORMANCE IN DECEMBER 2017

Construction industry closes 2017 with a lower decline than in 2016

Increased spare capacity in December

The indicators measuring activity levels and number of employees amounted respectively to 44.9 to 43.0 points, down by 1.9 points in December as compared to November. Despite the

The indicator measuring actual-usual activity levels dropped from 34.5 points in November to 33.4 points in December. Readings below 50 points indicate that activity is below usual levels for the month.

Activity level index* Diffusion index (0-100 points)

decline, which is usually expected in December, the indices reached an all-time high for the month since 2013 and 2014 respectively, indicating that both activity levels and jobs fell at a slower pace.

The operating capacity utilization rate reached 58% in December, down by one percentage point from November and by four percentage points from the historical average for the month. However, the indicator is two percentage points higher than the figure recorded in December 2016.

*The index ranges from 0 to 100 points. Figures above 50 points indicate an increase in activity levels.

Activity levels Dividing line

50

Increase

Decrease

DEC

2016

DECJAN

2017

FEB MAR APR MAY JUN JUL AUG SEP OCT NOV

37.9

39.3

40.3

44.5

43.344.1

42.8

44.3

46.7 46.446.9 46.8

44.9

3


FINANCIAL CONDITIONS OF CONSTRUCTION INDUSTRY IN THE FOURTH QUARTER OF 2017

The financial condition indicators recorded a third consecutive increase. Yet, they still remain below the 50-point dividing line, indicating that entrepreneurs are less dissatisfied with their profit margins and financial situation. The index measuring satisfaction with profit margins edged up from 34.4 to 37.0 points between the third and fourth quarters. On the same comparison basis, the index of satisfaction with financial situation grew from 39.1 points to 39.9 points.

The indicator of ease of access to credit posted a fourth consecutive growth in the fourth quarter and reached 30.7 points, up by 0.9 points from the figure observed in the previous quarter. The increase indicates that companies are facing fewer difficulties in accessing credit. The indicator ranges from 0 to 100, with readings below 50 points indicating difficulties to access credit.

Entrepreneur are less dissatisfied with their companies’ financial situation

Improvement in access to credit for businesses

Satisfaction with profit margins and financial situation* Diffusion index (0-100 points)

*The indices range from 0 to 100 points. Figures below 50 points indicate dissatisfaction with profit margins and/or financial conditions.

Profit margins in the quarter Financial situation in the quarter Dividing line

50

Satisfaction

Insatisfaction

38.5

32.2 31.7

37.0

41.4

36.4 36.0

39.9

Q4

2014

Q2

2015

Q4

2015

Q2

2016

Q4

2016

Q2

2017

Q4

2017

Ease of access to credit*Diffusion index (0-100 points)

*The indicators range from 0 to 100. Figures above 50 points indicate easier access to credit.

Access to credit in the quarter Dividing line

50

Easy

Difficult

Q4

2014

Q2

2015

Q4

2015

Q2

2016

Q4

2016

Q2

2017

Q4

2017

28.5 29.8

30.7

4


PROBLEMS FACED BY THE CONSTRUCTION INDUSTRY IN THE FOURTH QUARTER OF 2017

Main problems faced by the construction industry in the quarter (%)* Percentage (%)

Q4 2017 Q3 2017

The issue of high tax burden continued to rank first among major problems faced by the construction industry. The item was indicated by 37.8% of entrepreneurs in the fourth quarter, up from 32.3% in the third quarter.

Coming next are the problems of insufficient internal demand and lack of working capital. The percentage of companies indicating these two issues held virtually steady between the third and fourth quarters, standing at 29.8% and 27.4% respectively.

High tax burden is number one problem faced by construction industry

* Each company may indicate up to three items, so the sum of percentages exceeds 100%.

37.8

29.8

27,4

25.8

23.9

22.6

12.6

11,9

9.8

7.4

6.3

6.1

4.1

3.0

2.4

2.3

1.4

0.9

32.3

30.6

27.7

27.2

22.8

21.3

14.5

12.3

13.9

5.3

5.9

7.1

3.8

3.1

1.6

2.4

0.8

0.9

9.1

9.3

5.5

8.2

None

Others

Insufficient domestic demand

High interest rates

Client delinquency

High tax burden

Lack of working capital

Excessive red tape

Legal uncertainty

Lack of long-term funding

Unfair competition (informality,

smuggling, etc.)

Environmental licensing

Lack or high cost of skilled labor

Lack or high cost of raw materials

Lack or high cost of unskilled labor

Lack or high cost of energy

Weather conditions

Availability of land

Lack or high cost of support equipment

Difficulties in transportation

logistics (roads, etc.)

5


EXPECTATIONS FOR CONSTRUCTION INDUSTRY IN JANUARY 2018

The expectation indicators are up for the second month in a row, consolidating their position above the dividing line between an expected increase and decline. The indicators of expected activity levels and of expected new developments and services rose respectively by

Positive outlook for construction industry3.2 and 3.8 points, hitting the mark of 56.2 and 55.7 points in January. The indicators measuring expected purchases of inputs and raw materials and of expected number of employees dropped by 2.5 and 3.2 points respectively to 55.0 and 54.0 points.

50

Increase

Decrease

JAN

2017

MAR MAY JUL SEP NOV JAN

2018

50.4

53.0

56.2

47.4

JAN

2017


2018

50

50.0

51.9

55.7

46.6

Increase

Decrease

50

49.4

52.5

55.0

45.4

JAN

2017


2018

Increase

Decrease

50

49.0

50.8

54.0

45.7

JAN

2017


2018

Increase

Decrease

*The expectation indices range from 0 to 100 points. Figures below 50 points indicate an expected decline.

Expectation indices*Diffusion indices (0-100 points)

Activity level New developments and services

Expected purchases of raw materials Dividing line

Expected number of employees Dividing line

Purchases of raw materials Number of employees

Expected activity level Dividing line

Expected develompents and services Dividing line

6


The investment intentions index reversed part of the increase observed in December and fell by 1.7 points to 32.1 points in January. Compared with the same month of 2017, the index is up by 4.4

January sees decline in investment intentionspoints. The index ranges from 0 to 100 and the higher the reading, the greater the willingness to invest.

Investment intentions index*Diffusion index (0-100 points)

*The index ranges from 0 to 100. The higher the index, the greater the willingness to invest.

40.8

25,.0

27.732.1

25

30

35

40

45

JAN

2015

JUL JAN

2016

JUL JAN

2017

JUL JAN

2018

7


CONSTRUCTION BUSINESS CONFIDENCE INDEX IN JANUARY

Historical series* Diffusion indices (0-100)

*Figures below 50 points indicate lack of business confidence. The further below 50 points, the greater and more widespread the lack of confidence.

ICEI - Construction Dividing line

Business confidence remains on the riseThe index measuring confidence among construction entrepreneurs continued on the upward trend started in August – a further sign of business confidence. The ICEI-Construction index rose from 56.7 points in December 2017 to 57.2 points in January 2018.

This increase was led by an improvement in the expectations indicator, which edged up from 60.5 points to 61.4 points between December and January, standing significantly above the 50-point dividing line between pessimism and optimism. The indicator measuring current conditions remained practically stable at 49.1 points – below the 50-point mark, indicating that current conditions have worsened. This is to say that construction entrepreneurs are optimistic about the future, but have not yet noticed an improvement in the current situation of their businesses.

Thermometer for the ICEI - ConstructionIndex (0-100 points)

52.8 (historical average)

lack of confidence confidence

57.2

50

Confidence

Lack of

confidence

Historical average = 52.8

60.2

58.3

55.0

44.6

35.1

48.2

57.2

JAN

2012

JUL JAN

2013

JUL JAN

2014

JUL JAN

2015

JUL JAN

2016

JUL JAN

2017

JUL JAN

2018

8


OPERATION CAPACITYUTILIZATION (%) 1 ACTIVITY LEVEL 2 ACTUAL-USUAL ACTIVITY

LEVEL3 NUMBER OF EMPLOYEES2

Dec/16 Nov/17 Dec/17 Dec/16 Nov/17 Dec/17 Dec/16 Nov/17 Dec/17 Dec/16 Nov/17 Dec/17

CONSTRUCTION 56 59 58 37.9 46.8 44.9 27.5 34.5 33.4 36.0 44.9 43.0

SMALL 51 57 53 37.5 47.2 44.5 30.8 39.0 37.5 35.1 45.2 44.9

MEDIUM 55 61 57 38.0 47.8 43.6 28.8 35.9 33.9 37.4 44.6 43.5

LARGE 59 59 60 37.9 46.1 45.7 25.6 32.0 31.7 35.5 44.9 42.0

SATISFACTION WITH PROFITS 4

AVERAGE PRICES OFRAW MATERIALS EVOLUTION 2

SATISFACTION WITH FINANCIAL SITUATION 4 EASE TO ACCESS CREDIT 5

Q4 2016 Q3 2017 Q4 2017 Q4 2016 Q3 2017 Q4 2017 Q4 2016 Q3 2017 Q4 2017 Q4 2016 Q3 2017 Q4 2017

CONSTRUCTION 31.7 34.4 37.0 53.4 57.1 57.6 36.0 39.1 39.9 25.0 29.8 30.7

SMALL 32.5 35.8 36.0 54.3 55.3 54.7 34.5 38.7 39.3 26.3 31.5 29.3

MEDIUM 32.5 34.5 37.2 54.5 55.3 57.1 37.9 39.0 40.2 26.5 29.3 33.5

LARGE 31.0 33.8 37.2 52.4 58.8 59.0 35.4 39.4 40.0 23.7 29.4 29.7

ACTIVITY LEVEL6 NEW DEVELOPMENTS AND SERVICES 6

PURCHASES OF INPUTS AND RAW MATERIALS 6 NUMBER OF EMPLOYEES 6 INVESTIMENT INTENTION 7

Jan/17 Dec/17 Jan/18 Jan/17 Dec/17 Jan/18 Jan/17 Dec/17 Jan/18 Jan/17 Dec/17 Jan/18 Jan/17 Dec/17 Jan/18

CONSTRUCTION 47.4 53.0 56.2 46.6 51.9 55.7 45.4 52.5 55.0 45.7 50.8 54.0 27.7 33.8 32.1

SMALL 47.7 52.8 54.8 46.1 51.4 53.3 45.5 51.7 52.8 45.5 50.6 51.1 28.3 33.9 32.7

MEDIUM 47.0 53.6 54.4 48.1 50.4 53.3 46.4 52.5 53.4 46.5 51.4 52.7 27.8 31.4 31.2

LARGE 47.5 52.8 57.7 46.0 53.0 57.9 44.7 52.8 56.8 45.4 50.6 55.8 27.4 35.2 32.4

ICEI - CONSTRUCTION8 CURRENT CONDITIONS9 EXPECTATIONS10

Jan/17 Dec/17 Jan/18 Jan/17 Dec/17 Jan/18 Jan/17 Dec/17 Jan/18

CONSTRUCTION 48.2 56.7 57.2 35.7 49.2 49.1 54.6 60.5 61.4

SMALL 46.7 55.8 54.8 35.3 48.3 46.2 52.4 59.9 59.6

MEDIUM 48.7 56.4 56.5 37.6 49.1 48.7 54.4 60.0 60.3

LARGE 48.4 57.2 58.5 34.7 49.5 50.4 55.6 61.0 62.6

RESULTS BY COMPANY SIZE

Construction industry performance

Financial conditions in the quarter

Construction Business Confidence Index (ICEI - Construction) and its components

Expectations of construction industry

1 - The indicator varies in the 0%-100% interval. Series started in January 2012.2 - The indicator varies in the 0-100 interval. Figures above 50 points indicate growth.3 - The indicator varies in the 0-100 interval. Figures above 50 points indicate higher-than-usual activity levels.4 - The indicator varies in the 0-100 interval. Figures above 50 points indicate satisfaction. 5 - The indicator varies in the 0-100 interval. Figures above 50 points indicate ease of access. 6 - The indicator varies in the 0-100 interval. Figures above 50 points indicate positive expectations.7 - The indicator varies in the 0-100 interval. The higher the index, the greater the willingness to invest.8 - The ICEI varies in the 0-100 interval. Figures above 50 points indicate business confidence.9 - The indicator varies in the 0-100 interval. Figures above 50 points values indicate a better situation as compared to the last six months..10 - The indicator varies in the 0-100 interval. Figures above 50 points indicate optimistic expectations for the next six months.


CONSTRUCTION SMALL MEDIUM LARGE

Q3-17 Q4-17 Q3-17 Q4-17 Q3-17 Q4-17 Q3-17 Q4-17

ITEMS % % Ranking % % Ranking % % Ranking % % Ranking

High tax burden 32,3% 37,8% 1 39,8% 40,2% 1 33,6% 37,9% 1 26,2% 36,5% 2

Insufficient domestic demand 30,6% 29,8% 2 26,9% 22,6% 4 29,4% 26,7% 3 34,4% 37,4% 1

Lack of working capital 27,7% 27,4% 3 24,4% 26,2% 2 27,3% 24,6% 4 30,3% 31,3% 3

Client delinquency 27,2% 25,8% 4 23,4% 21,3% 6 27,3% 28,4% 2 29,5% 25,2% 5

High interest rates 22,8% 23,9% 5 25,9% 22,0% 5 21,3% 22,8% 5 23,0% 26,1% 4

Excessive red tape 21,3% 22,6% 6 23,9% 23,2% 3 22,7% 22,4% 6 18,0% 22,6% 6

Lack of long-term funding 14,5% 12,6% 7 10,4% 12,8% 9 14,3% 9,9% 8 17,2% 15,7% 7

Legal uncertainty 12,3% 11,9% 8 11,4% 7,9% 11 10,8% 11,2% 7 14,8% 14,8% 8

Unfair competition (informality, smuggling, etc.) 13,9% 9,8% 9 20,4% 18,3% 7 12,2% 9,9% 8 12,3% 5,2% 13

None 9,3% 9,1% 10 8,5% 14,0% 8 8,0% 9,5% 10 11,5% 6,1% 11

Lack or high cost of raw materials 5,3% 7,4% 11 5,0% 8,5% 10 6,3% 7,3% 11 4,1% 7,0% 9

Lack or high cost of skilled workers 5,9% 6,3% 12 8,0% 6,1% 12 5,6% 7,3% 11 4,9% 5,2% 13

Environmental licensing 7,1% 6,1% 13 5,0% 6,1% 12 6,6% 6,0% 13 9,0% 6,1% 11

Others 8,2% 5,5% 14 5,5% 2,4% 17 9,4% 5,6% 14 8,2% 7,0% 9

Lack or high cost of unskilled workers 3,8% 4,1% 15 6,0% 2,4% 17 3,8% 3,9% 16 2,5% 5,2% 13

Weather conditions 3,1% 3,0% 16 3,0% 4,3% 14 4,2% 4,3% 15 1,6% 0,9% 18

Difficulties in transportation logistics (roads, etc.) 1,6% 2,4% 17 1,5% 3,0% 16 1,0% 3,4% 17 2,5% 0,9% 18

Lack or high cost of energy 2,4% 2,3% 18 1,5% 3,7% 15 2,1% 1,3% 19 3,3% 2,6% 16

Availability of land 0,8% 1,4% 19 1,0% 1,2% 19 1,4% 1,3% 19 0,0% 1,7% 17

Lack or high cos of support equipment 0,9% 0,9% 20 1,0% 0,0% 20 1,0% 2,2% 18 0,8% 0,0% 20

Main problems

CONSTRUCTION INDUSTRY SURVEY | English version of “Sondagem Indústria da Construção - Dezembro/2017” | Monthly publication of the National Confederation of Industry - CNI | www.cni.org.br | Policy and Strategy Unit - DIRPE | Economic Policy Unit - PEC| Executive manager: Flávio Castelo Branco | Research and Competitiveness Unit - GPC | Executive manager: Renato da Fonseca | Analysis: Flavia Coelho Branco Junqueira Ferraz | Team: Roxana Campos, Aretha Silícia Lopez Soares and Luis Fernando Melo Mendes (CBIC) | CNI Publishing Center | Graphic design supervision: Carla Gadêlha | Customer Service - Phone: +55 (61) 3317-9992 – email: [email protected] | This publication may be copied, provided that the source is mentioned.

Learn more For more information on the survey, including sectoral results, previous editions, methodology and historical series, visit: www.cni.org.br/e_sondconstr

iSample profile:528 enterprises, including 173 small, 238 medium and 117 large.Data collection period: January 3-16, 2018.

Technical specifications

http://www.cni.org.br/e_sondconstr

Documents

CNI indicators ISSN 2317-7322 • Year 8 • Number 12 • December … · 2018. 5. 20. · 6 Construction Industry Survey ISSN 2317-7322 Year 8 Number 12 December 2017 The investment