Improved expectations generate highest monthly increase in Brazilian Construction Confidence

"It is still impossible to pinpoint exactly when the sector will be free from the recession cycle", says FGV researcher.
Economics
30 January 2017

Brazil’s Construction Confidence Index (ICST) rose 2.5 points in January 2017, reaching a total of 74.5 points – the highest level since June 2015 (76.2 points). The survey was conducted by FGV's Brazilian Institute of Economics (IBRE), gathering data from 700 companies between the 2nd and 24th of this month.

“Combined with a slightly better outlook regarding the current status, higher expectations helped construction confidence reach its highest monthly rate in January. However, it is still impossible to pinpoint exactly when the sector will be free from the recession cycle, since the increase in confidence levels is still much more reliant on forecasts than actual business improvements. It is important to remember that companies’ contract portfolios are still at a very low level,” said Ana Maria Castelo, Construction Project Coordinator at IBRE.

The ICST high in January is attributed to an upsurge in both components of the index. The Current Situation Index (ISA-CST) was up 1.5 point, totaling 65.3 points, influenced by the indicator that gauges the current business situation, which was up 1.5 point. The Expectations Index (IE-CST) was up 3.4 points, totaling 84.0 points. Among the IE-CST’s components, prospects regarding demand in the next three months were the main driver behind such growth, up 3.9 points in the margin.

Prospects regarding demand growth in the coming months, in turn, seem to have favored staff decisions in the segment. Between December and January, the percentage of companies expecting to lay off employees dropped from 41.4% to 32.7%, while the percentage of those planning to hire new workers rose from 10.2% to 14.0%. Despite still being far from representing a full hiring recovery, this result at least shows some decrease in the rate of layoffs.

“The year of 2016 was particularly bad for employment in construction, which recorded a total layoff of 358,000 jobs,” said Ana Castelo.

The full report is available on the IBRE website.