CONSTRUCTION INDUSTRY SURVEY

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1 CNI indicators CONSTRUCTION INDUSTRY SURVEY Investment intentions increase in spite of idle capacity Notwithstanding the continuous decline in some production indicators, such as activity, employment and capacity utilization levels, entrepreneurs in the construction industry remained confident in November. Spare capacity in the sector increased in a pronounced fashion across all groups of companies, with the operating capacity utilization rate reaching 56% in November, down by three percentage points from October. The steepest declines in operating capacity were observed in companies performing in the Civil engineering and Specialized construction activities sectors. Despite the low operating capacity utilization levels, entrepreneurs are showing more optimistic expectations about activity levels and new developments and services. This corroborates the increase in confidence measured in the ICEI-Construction index and the marked rise in investment intentions, which had been stagnant and edged up by 2.3 points between November and December to 34.8 points. 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.

2 PERFORMANCE OF CONSTRUCTION INDUSTRY IN EMBER Activity and employment still trending downward Activity levels and the number of employees are both down on a month-over-month basis, with the indicators falling by 2.1 points and 1.7 points respectively in November. As they moved away from the -point dividing line, the indices show that activity levels and employee numbers in the construction industry continued on a downward trend in November. This month, the activity indicator stood at 45.6 points, down by 1.2 points from November last year. The index measuring number of employees in turn amounted to 43.2 points, representing a 1.7 point decline from the figure recorded in the same period of. Activity and employment index Diffusion index (0-100 points)* JAN MAR APR MAY JUL AUG SEP OCT Activity levels Number of employees Dividing line *The index ranges from 0 to 100. Figures below points indicate a decline in activity levels and employment. Operating capacity utilization falls significantly in November The operating capacity utilization rate stood at 56% in November, down by three percentage points both in relation to October and in relation to November. With this decline, operating capacity utilization is below its historical average for the month of 62%. The indicator measuring actual-usual activity levels decreased by 0.2 points in November from last month to 35.3 points. The indicator remains below the -point mark, showing that activity is below usual levels on a month-over-month basis. SIZE AND SECTOR The decline in activity levels is influenced by the performance of companies focused on specialized construction activities and of large businesses, which recorded a month-overmonth decline of 1.8 and 0.5 points respectively in their activity levels. The operating capacity utilization rate for all groups of enterprises experienced a decline, with emphasis on those operating in the civil engineering and specialized construction activities sectors for both of them, the indicator fell by five percentage points. 2

3 Operating capacity utilization In (%) MAY AUG MAY Total Building construction AUG MAY AUG Construction specialized services sector Infrastructure constructions INDUSTRY S EXPECTATIONS IN EMBER December sees increase in investment intentions The investment intentions index (purchases of machinery and equipment, research and development, and product or process innovation) experienced a significant increase in December, indicating a high propensity to invest. The index hit the mark of 34.8 points in December, up by 2.3 points as compared to October. The index 3 ranges from 0 to 100 points and the higher the reading, the greater the willingness to invest. The indicator is up by one point from the figure registered in December and by 1.2 points from its 33.6-point historical average.

4 Modest increase in expectations In general, the expectation indices show an improvement in the outlook for the next six months. The indicators suggest a slight decrease in optimism about purchases of raw materials and inputs and number of employees. However, they indicate an increase in optimism about activity levels and new developments and services. The indicator measuring purchases of raw materials and number of employees fell by 0.6 and 0.1 points respectively, reaching 52.8 and 52.7 points. Despite the decline, they are still above the -point dividing line, suggesting some optimism about the future. Expectations regarding activity levels and new developments and services increased and moved further away from the -point mark, showing an increase in optimism in December. The indices measuring activity levels and new developments and services grew respectively by 0.8 and 0.7 points to 55.5 and 55.2 points. Expectations indices Diffusion indexes (0-100 points)* Activity levels New developments and services APR AUG OCT APR AUG OCT Activity level Dividing line New developments and services Dividing line Purchases of raw materials Number of employees APR AUG OCT APR AUG OCT Purchases of raw materials Dividing line Number of employees Dividing line *The indices vary in the interval. Figures above points indicate an expected growth. 4

5 CONSTRUCTION BUSINESS CONFIDENCE INDEX IN EMBER Construction entrepreneurs remain confident The Construction Business Confidence Index (ICEI-Construction) hit the mark of 62.3 points in December, representing a 1.6-point increase from November. Confidence levels are 9.3 points above their historical average and exceeded the -point mark, showing that entrepreneurs are more optimistic about the sector s growth. The indicator measuring current conditions edged up by 1.4 points from November and stood at.6 points in December. The expectations indicator grew from 66.5 points in November to 68.2 points in December representing an increase of 1.7 points. The increase in both indicators shows that entrepreneurs are more optimistic about current business conditions compared to previous months and about expectations for the coming months. Thermometer for the ICEI - Construction Index (0-100 points)* 62.3 lack of confidence confidence 53.0 (historical average) Historical series Diffusion index (0-100 points)* 62.3 Confidence historical average = Lack of confidence ICEI - Construction Dividing line *Figures above points indicate business confidence. The further above points, the more significant and widespread the confidence. 5

6 Results by company size Construction industry performance Operation Capacity Utilization (%) 1 Activity Level 2 Actual-Usual Activity Level 3 Number of Employees 2 Nov/17 Oct/18 Nov/18 Nov/17 Oct/18 Nov/18 Nov/17 Oct/18 Nov/18 Nov/17 Oct/18 Nov/18 CONSTRUCTION SMALL MEDIUM LARGE Expectations for the construction industry Activity Level 4 New Developments and Services 4 Purchases of Inputs Investment Number of Employees and Raw Materials 4 4 intentions 5 Dec/17 Nov/18 Dec/18 Dec17 Nov/18 Dec/18 Dec/17 Nov/18 Dec/18 Dec/17 Nov/18 Dec/18 Dec/17 Nov/18 Dec/18 CONSTRUCTION SMALL MEDIUM LARGE Construction business confidence index and its components ICEI - Construction 6 Current conditions 7 Expectations 8 Dec/17 Nov/18 Dec/18 Dec/17 Nov/18 Dec/18 Dec/17 Nov/18 Dec/18 CONSTRUCTION SMALL MEDIUM LARGE The indicator varies in the 0%-100% interval. Series started in January The indicator varies in the interval. Figures above points indicate growth. 3 The indicator varies in the interval. Figures above points indicate higher-than-usual activity levels. 4 The indicator varies in the interval. Figures above points indicate positive expectations. 5 The indicator varies in the interval. The higher the index, the greater the willingness to invest. 6 The ICEI-Construction varies in the interval. Figures above points indicate business confidence. 7 The indicator varies in the interval. Figures above points indicate a better situation as compared to the last six months. 8 The indicator varies in the interval. Figures above points indicate optimistic expectations for the next six months. Technical specifications Sample profile: 539 enterprises, including 184 small, 240 medium and 115 large companies. Data collection period: December, 4-12,. i Learn more For more information on the survey, including sectoral results, previous editions, methodology and historical series, visit: CONSTRUCTION INDUSTRY SURVEY English version of Sondagem Indústria da Construção - Novembro Monthly Publication of the National Confederation of Industry - CNI Policy and Strategy Unit - DIRPE Economic Policy Unit - PEC Executive manager: Flávio Castelo Branco Research and Competitiveness Unit - GPC Executive manager: Renato da Fonseca Statistics Unit Manager: Edson Velloso Team: Dea Guerra Fioravante, Luis Fernando Melo Mendes (CBIC) and Roxana Campos Editing Unit Coordinator: Carla Gadelha Graphic design: Simone Marcia Broch Customer Service - Phone: +55 (61) sac@cni.com.br This publication may be copied, provided that the source is mentioned.