The Construction Confidence Index (CSTI) of Fundação Getulio Vargas’ Brazilian Institute of Economics (IBRE) fell by 1.8 points in May, reaching 80.7 points, the lowest level since September last year (80.4 points). In quarterly moving averages, the CSTI has declined for the third consecutive time, this time by 1.4 point.

“The combination of low growth, contingency of budgetary resources and increased uncertainties has discouraged Construction entrepreneurs. The perception at the turn of the year that there was a slow but steady improvement in the business environment is giving rise to an increasingly widespread pessimism among industry segments. In May, the increase in pessimism affected especially the area of ​​residential buildings and road works,” said Ana Maria Castelo, Construction Project Coordinator at FGV IBRE.

With the decrease of the CSTI in May, the index remains without an increase this year, accumulating a loss of 4.7 points in the first five months of the year. The result of the CSTI was mainly influenced by the Expectations Index (EI-CSTI), which fell by 3.0 points, the largest decrease in the margin since August last year (-3.2 points). The index was 89.4 points, influenced by the expected demand indicator, which fell by 2.7 points, reaching 89.4 points, and the business trend indicator, which fell by 3.3 points, reaching 89.5 points.

The Current Situation Index (ISA-CST) decreased by 0.6 points in May, reaching 72.4 points. The negative result of the ISA-CST was exclusively influenced by the indicator that measures the degree of satisfaction with the current business situation, which declined by 1.4 points, returning to the level of September 2018 (74.1 points).

The sector’s Capacity Utilization Level (NUCI) remained relatively stable, with a variation of +0.1 percentage points, reaching 66.3% in May. Both the NUCI for Machinery and Equipment and the NUCI for Workforce remained stable, with the same variation as the aggregate NUCI.

In line with the worsening expectations for demand in the coming months, business owners have adjusted their hiring forecasts downward. “After a period of strong decline in the labor market – between December 2013 and December 2018 – in which construction companies laid off roughly 1.2 million workers, companies started the year hiring. The worsening scenario threatens this recovery momentum of the labor market,” said Ana Maria Castelo.

The May 2019 edition collected information from 563 companies between the 2^nd and 22^nd of this month. The next announcement of the Construction Survey will take place on June 26, 2019. The full study is available on the website.