Difficult Period with the Construction Industry in Crisis – GDP in Decline.

Written by Paulo Nogueira

Published on 14/07/2018 at 16:13

Construção Civil em crise.

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Challenging Period With The Construction Sector in Crisis. The Sector’s GDP Decline Represents The 16th Consecutive Drop. Companies Struggle to See Improvement.

With the construction sector in crisis, the GDP in this area experienced its 16th consecutive decline in the first three months of 2018. This marks the worst economic performance of the year. The GDP (of this sector) encompasses the total revenue generated by construction companies and the salaries of their employees.

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In comparison from 2018 to 2017, both in the same period, a decline of 2.2% was recorded, thus putting into question the hope for improvement in the current scenario from the companies’ perspective.

The Construction Sector began 2018 with a reduction in its activities, and it is worth noting that it represents more than 50% of Brazil’s investments, maintaining its characteristic of generating significant employment. Over the last four years, it has recorded a 20% decline. In any comparative basis, the GDP results of the sector demonstrate that its activities remain depressed.

The slow pace of Construction Sector activities can be explained by the sluggish process of economic recovery. For the second quarter, the situation is expected not to make significant strides. Also affected by the severe crisis caused by the truck drivers’ strike, the Construction Sector is experiencing losses in its activities just like other sectors of the economy in the country.

The silver lining in this story is that the wave of layoffs in the construction sector has paused, but we cannot say when companies will start hiring en masse again.

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Market Insecurity

The owner of the construction company MBigucci, Milton Bigucci, emphasizes that the market insecurity is very high and this complicates consumer decision-making and the generation of new jobs. The pace of investments remains on standby.

Only when he feels the consumer is more comfortable and willing to invest in a property will he launch his new projects (although he already has at least six approved and shelved by the City of São Paulo), says Milton.

“The uncertainties in the economy and politics are very strong, and the sector feels that the client is more insecure than at the beginning of the year,” says Bigucci.

Contract Cancellations

Many buyers returned their properties acquired off-plan due to the severe crisis, and this has become a significant nightmare for construction companies. The Construction Sector is demanding a regulated way to minimize losses when a return occurs. The Chamber has approved a bill regulating contract cancellations.

With the hope and expectation of improved sales after the October elections, businessman Alexandre Frankel (from construction company Vitacon) explains that consumers are frightened. His company has nine developments ready to be launched this year.

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Lack of Investment

Affected by the current economic situation, the state of the construction sector in crisis suffers from a lack of investment. The current amount/volume of investment is not even enough for infrastructure maintenance, let alone new constructions. Nonetheless, despite all the discouragement due to the current economic situation in the country, it is believed that this sector will regain strength by the end of the year, post-elections.

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