Remained Steady And Fluctuated Within The Margin.pdf

CNI indicators ISSN 2317-7322 • Year 6 • Number 9 • September 2015

CONSTRUCTION INDUSTRY SURVEY Further deterioration in construction industry The construction industry continues to deteriorate. The index of activity levels and number of employees remain below 50 points, indicating month-over-month drops. Operating capacity utilization experienced a slight increase, up from 58% in August to 59% in September, but is still eight percentage points lower than the figure recorded in September 2014. The main problems faced by the construction industry in the third quarter were high tax load, high interest rates and insufficient domestic demand. In addition, construction entrepreneurs reported greater difficulties to access credit and prices of inputs and raw materials continued to trend upward as compared to the previous quarter. As a result, respondents have expressed greater dissatisfaction with their companies’ financial situation and profits. Entrepreneurs are also more pessimistic about the next six months. The indices of expected activity levels, new developments and services, and number of employees are all down in October. Meanwhile, the index of expected purchases of inputs and raw materials has held steady below the 50- point mark.

Further dissatisfaction with financial conditions Indices of satisfaction with profits and financial situation **

Satisfaction

50

Dissatisfaction

48.4 44.7 38.3

36.1

34.7 I 2013

II

III

Satisfaction with profits

IV

I 2014

II

III

IV

Satisfaction with financial situation

31.9

I 2015

II

III

Dividing line

* The indicators range from 0 to 100. Figures above 50 points indicate that entrepreneurs are satisfied with their companies’ profits. ** The indicators range from 0 to 100. Figures above 50 points indicate that entrepreneurs are satisfied with their companies’ financial situation.

1

Dissatisfaction with profits and financial conditions are at an all-time high since the series started in 2009.

Construction Industry Survey ISSN 2317-7322 • Year 6 • Number 9 • September 2015

EVOLUTION OF CONSTRUCTION INDUSTRY IN SEPTEMBER 2015 ACTIVITY LEVELS AND NUMBER OF EMPLOYEES September’s result shows that activity levels continued to fall at the same pace as August, whose index decreased to 35.9 points from 36.2 points. The same goes for the index of number of employees, which changed from 34.7 points to 35.2 points. Both indicators have fluctuated within their margins of error and remained below the 50-point dividing line. The index ranges from 0 to 100, with figures below 50 points indicating a month-over-month decline in activity and employment.

Activity levels still falling Activity level index*

Increase

50

Decrease

47.9 43.0

35.9 SEP 2011

MAR 2012

SEP

MAR 2013

SEP

MAR 2014

SEP

MAR 2015

SEP

* The index varies in the 0-100 interval. Figures above 50 points indicate increased activity levels on a month-over-month basis.

ACTUAL-USUAL ACTIVITY LEVELS The index of actual-usual activity levels have remained steady and fluctuated within the margin of error, down from 27.2 points in August to 27.1 points in September. The index ranges from 0 to 100 points, with figures below 50 points indicating lower-than-usual activity levels for the month.

OPERATING CAPACITY UTILIZATION The weak activity in construction has contributed to the low level of operating capacity utilization, which is down by eight percentage points from the same month in 2014. Between August and September, the indicator increased by one percentage point, edging up from 58% to 59%.

2

Construction Industry Survey ISSN 2317-7322 • Year 6 • Number 9 • September 2015

FINANCIAL CONDITIONS IN CONSTRUCTION INDUSTRY IN THE 3RD QUARTER OF 2015 ACCESS TO CREDIT The index of ease of access to credit has deteriorated as compared to the previous quarter, down from 28.6 points in the second quarter to 25.9 points in the third quarter, hitting its lowest level in the series. The index ranges from 0 to 100 points, with figures below 50 points indicating difficult access to credit. The further below 50 points, the greater is the company’s difficulty in obtaining funding sources.

Increasingly difficult access to credit Index of ease of access to credit *

Easy Difficult

50

45.7

28.6 25.9 I 2013

II

III

Access to credit

IV

I 2014

II

III

IV

I 2015

II

III

Dividing line

* The index ranges from 0 to 100. Figures above 50 points indicate easier access to credit.

PROFITS AND FINANCIAL SITUATION The indicators of financial conditions and profits have hit a record low in their historical series, indicating a widespread dissatisfaction of construction companies. The indices range from 0 to 100 points, with figures below 50 points showing dissatisfaction with financial situation and profits. The lower the index, the greater and more widespread is the company’s dissatisfaction.

PRICES OF RAW MATERIALS The average price of inputs and raw materials has continued on an upward trend, though fluctuating within the margin of error.

3

Construction Industry Survey ISSN 2317-7322 • Year 6 • Number 9 • September 2015

PROBLEMS FACED BY CONSTRUCTION INDUSTRY IN THE 3RD QUARTER OF 2015 The main problems faced by the construction industry in the 3rd quarter of 2015 were high tax load, indicated by 39.6% of all respondents; high interest rates, with 36.6% of entrepreneurs marking this option; and insufficient domestic demand, mentioned by 30.7% of all firms considered in the survey. The issue of insufficient domestic demand, which ranked fourth in the previous quarter with 27.6%, has gained importance among main problems. The sharp economic downturn, coupled with high interest rates, have contributed to the decline in domestic demand in the construction industry.

Insufficient domestic demand gains importance among main problems Main problems faced by the construction industry in the quarter (%) High tax burden

35.4

39.6

36.6 35.0

High interest rates demand

30.7 27.6

Client delinquency

29.1 30.5 25.7 27.2

Lack of working capital

22.0 23.6

Excessive red tape 14.3 17.1

Lack of long-term funding

13.5 12.5

Lack or high cost of raw materials Lack or high cost of skilled workers

11.7 11.4

Unfair competition (informality, smuggling, etc.)

8.8

5.3

Legal uncertainty

8.2 9.6

Lack or high cost of unskilled workers

8.2 9.3 6.9 8.1

Lack or high cost of energy Environmental licensing

5.8 6.8

Weather conditions

4.3 6.2

tation logistics (roads, etc.)

3.0 2.6

Lack or high cost of support equipment

2.6 2.6

Availability of land

1.3 2.5

None

8.5 9.1

Other

8.0 6.8

Q3 2015 Q2 2015

Note: In the survey, entrepreneurs are asked to indicate up to three items representing the main problems faced by their companies, so the sum of the percentages exceeds 100%.

4

Construction Industry Survey ISSN 2317-7322 • Year 6 • Number 9 • September 2015

EXPECTATIONS IN OCTOBER Pessimism deepened in the third quarter. The indicators of expected activity levels, new developments and services, and number of employees over the next six months are down to all-time lows in their historical series, showing that entrepreneurs are more pessimistic. The indicator of purchases of inputs and raw materials remained below 50 points.

Index of expected activity levels*

Increase

Index of expected new developments and services**

Increase

50

Decrease

47.3

50

47.4

Decrease

41.7

41.1

37.7 OCT 2014

DEC

FEB 2015

Activity level

APR

JUN

AUG

36.9 OCT 2014

OCT

Dividing line

FEB 2015

APR

JUN

New developments and services

Index of expected purchases of inputs and raw materials***

AUG

Dividing line

Increase 50

46.5

Decrease

41.1

46.8 40.5

37.0 OCT 2014

OCT

Index of expected number of employees****

Increase 50

Decrease

DEC

DEC

FEB 2015

APR

Purchases of inputs and raw materials

JUN

AUG

35.7 OCT 2014

OCT

Dividing line

DEC

FEB 2015

Number of employees

APR

JUN Dividing line

* The index ranges from 0 to 100. Figures above 50 points indicate an expected growth in activity levels. ** The index ranges from 0 to 100. Figures above 50 points indicate an expected increase in new developments and services. *** The index ranges from 0 to 100. Figures above 50 points indicate an expected growth in purchases of inputs and raw materials. **** The index ranges from 0 to 100. Figures above 50 points indicate an expected increase in number of employees.

5

AUG

OCT

Construction Industry Survey ISSN 2317-7322 • Year 6 • Number 9 • September 2015

INVESTMENT INTENTION IN OCTOBER Investment intention of construction companies over the next six months remain at a low level. The index has fluctuated within the margin of error (down from 26 points in September to 25.2 points in October), reaching an all-time low since the beginning of the series. As compared to the same period the year before, the indicator is down by 17.8 points. This lower propensity to invest is the result of weak activity, high operating capacity utilization, and pessimistic expectations. SECTORS: When analyzing the construction sectors separately, the Civil Engineering sector (23.1 points) stands out with the lowest index among all sectors and companies of all sizes. The low investment intention in this sector can be explained by the importance of government resources and of infrastructure concession programs. The current fiscal adjustment efforts required to bring the economy back on track have restricted investments in the construction industry and pushed down the investment intention indicator.

Investment intention still low Investment intention* 60 55

55.2

50 45 40 35 30

25.2 Oct/15

25 NOV 2013

JAN 2014

MAR

MAY

JUL

SEP

NOV

JAN 2015

MAR

MAY

JUL

* The index varies in the 0-100 interval. The higher the index, the more companies are willing to invest.

6

SEP

Construction Industry Survey ISSN 2317-7322 • Year 6 • Number 9 • September 2015

Results by company size

MONTHLY EVOLUTION OF CONSTRUCTION INDUSTRY

Operation Capacity Utilization (%) 1

Activity Level 2

Actual-Usual Activity Level3

Number of Employees2

Sep/14

Aug/15

Sep/15

Sep/14

Aug/15

Sep/15

Sep/14

Aug/15

Sep/15

Sep/14

Aug/15

Sep/15

67

58

59

42.3

36.2

35.9

38.8

27.2

27.1

43.1

34.7

35.2

SMALL

63

55

55

44.7

36.1

36.6

43.0

28.6

29.8

45.2

36.0

38.1

MEDIUM

67

58

57

43.6

36.9

36.1

40.2

27.2

27.1

45.0

35.2

35.7

LARGE

69

60

61

40.7

35.9

35.6

36.4

26.6

26.2

41.3

33.9

33.8

CONSTRUCTION BY SIZE

FINANCIAL CONDITIONS IN THE QUARTER

Satisfaction with Profits4

Average Prices of Raw Materials Evolution2

Satisfaction with Financial Situation4

Ease to Access Credit5

III-14

II-15

III-15

III-14

II-15

III-15

III-14

II-15

III-15

III-14

II-15

III-15

39.3

32.7

31.9

62.0

62.0

61.7

44.5

37.2

36.1

37.8

28.6

25.9

SMALL

43.5

31.5

31.2

60.7

60.2

59.1

46.5

33.5

35.5

36.5

30.8

26.4

MEDIUM

38.3

32.1

30.4

59.7

61.7

62.6

43.6

36.5

34.5

37.5

26.4

27.0

LARGE

38.4

33.5

33.0

63.7

62.9

62.1

44.2

39.0

37.3

38.5

29.0

25.0

CONSTRUCTION BY SIZE

EXPECTATIONS

New Developments and Services6

Activity Level6

Purchases of Inputs and Raw Materials6

Number of Employees6

Investiment Intention

Oct/14

Sep/15

Oct/15

Oct/14

Sep/15

Oct/15

Oct/14

Sep/15

Oct/15

Oct/14

Sep/15

Oct/15

Oct/14

Sep/15

Oct/15

47.3

39.5

37.7

47.4

37.9

36.9

46.5

37.1

37.0

46.8

37.3

35.7

43.0

26.0

25.2

SMALL

50.3

42.6

41.4

50.9

43.4

40.6

49.6

40.3

41.6

49.6

41.8

39.9

47.6

27.3

26.4

MEDIUM

46.8

39.5

38.7

47.7

37.9

38.5

46.7

38.5

37.5

47.0

38.2

36.0

40.9

25.6

25.2

LARGE

46.5

38.3

35.8

46.0

35.9

34.6

45.2

35.1

35.0

45.6

35.1

34.0

42.6

25.7

24.8

CONSTRUCTION BY SIZE

The indicator varies in the 0%-100% interval. Series started in January 2012. 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 a more-than-satisfactory situation. 5 The indicator varies in the 0-100 interval. Figures above 50 points indicate easy access to credit. 6 The indicator varies in the 0-100 interval. Figures above 50 indicate positive expectations. 1 2

7

Construction Industry Survey ISSN 2317-7322 • Year 6 • Number 9 • September 2015

Results by company size MAIN PROBLEMS

CONSTRUCTION II-15

SMALL

III-15

II-15

MEDIUM

III-15

II-15

LARGE

III-15

II-15

III-15

%

%

Ranking

%

%

Ranking

%

%

Ranking

%

%

Ranking

High tax burden

35.4

39.6

1

38.4

40.9

1

41.4

41.0

1

30.8

35.5

2

High interest rates

35.0

36.6

2

31.6

35.4

2

36.4

36.6

2

35.4

38.2

1

Insufficient domestic demand

27.6

30.7

3

24.2

28.3

3

31.1

31.9

3

26.9

31.6

4

Client delinquency

30.5

29.1

4

26.8

25.8

4

32.5

27.8

4

30.8

35.5

3

Lack of working capital

27.2

25.7

5

22.1

21.2

6

25.7

27.5

5

30.0

28.3

5

Excessive red tape

23.6

22.0

6

17.9

22.7

5

22.9

25.6

6

26.2

14.5

6

Lack of long-term funding

17.1

14.3

7

12.1

11.1

8

13.9

16.5

7

20.8

14.5

6

Lack or high cost of raw materials

12.5

13.5

8

18.4

14.6

7

11.8

14.3

8

10.8

10.5

9

Lack or high cost of skilled workers

11.4

11.7

9

16.8

11.1

8

13.2

12.1

9

8.5

11.8

8

Unfair competition (informality, smuggling, etc.)

5.3

8.8

10

6.8

9.6

11

6.8

8.8

11

3.8

7.9

11

Legal uncertainty

9.6

8.2

11

6.8

4.0

16

9.3

9.9

10

10.8

10.5

9

Lack or high cost of unskilled workers

9.3

8.2

11

8.9

9.1

12

11.1

7.7

12

8.5

7.9

11

Other

6.8

8.0

13

6.3

10.6

10

8.2

7.0

13

6.2

6.6

14

Lack or high cost of energy

8.1

6.9

14

8.9

7.6

13

8.2

6.2

14

7.7

7.2

13

Environmental licensing

6.8

5.8

15

4.2

5.6

14

5.7

5.9

15

8.5

5.9

15

Weather conditions

6.2

4.3

16

6.3

5.1

15

8.9

4.4

16

4.6

3.3

16

Difficulties in transportation logistics (roads, etc.)

2.6

3.0

17

4.2

3.5

17

2.1

3.3

18

2.3

2.0

17

Lack or high cost of support equipment

2.6

2.6

18

2.1

3.0

18

3.6

3.7

17

2.3

-

19

Availability of land

2.5

1.3

19

3.2

1.0

19

1.1

1.1

19

3.1

2.0

18

None

9.1

8.5

-

14.7

9.6

-

5.4

7.0

-

9.2

9.9

-

ITEMS

i

Learn more

For more information on the survey, including historical series and methodology, please visit: www.cni.org.br/sondconstr (in Portuguese only)

Technical specifications Sample profile: 629 enterprises, including 200 small, 275 medium and 154 large companies. Data collection period: October 1-15, 2015.

CONSTRUCTION INDUSTRY SURVEY | 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 | Team: Marcelo Souza Azevedo, Flávia Junqueira Ferraz, Rafael da Silva Vasconcelos, Roxana Campos, Aretha Silícia Lopez Soares e Luis Fernando Melo Mendes (CBIC) | CNI Publishing Center | Graphic design supervision: Alisson Costa| Customer Service - Phone: +55 (61) 3317-9992 – email: [email protected] | This publication may be copied, provided that the source is mentioned.