Business sentiment is improving in the construction sector

Business sentiment in the construction sector continued to improve in the fourth quarter of 2023, according to a review by the Center for Market Research (CSR) of the HSE ISSEK. The business confidence index (ICI) in this industry reached its best value for the year and amounted to minus 11% (versus minus 14% a quarter earlier). A year earlier, however, its value was minus 9%. As ISSEK analysts explain, “the business sentiment of developers is at a relatively favorable level and, accordingly, the construction industry itself is in a stable state of development.” The construction sector ranks second in terms of optimism, slightly behind the manufacturing industry.

The improvement in the index is associated with more positive estimates of the supply of orders and the expected number of employees in the construction industry. Thus, in the fourth quarter, the balance of opinions regarding the dynamics of the volume of construction work changed: 23% of companies recorded an increase, 22% – a decrease (in the previous quarter it was 19% and 21%, respectively). At the same time, as noted by the HSE Center for Research, a third of companies in the fourth quarter had a portfolio of orders below the normal level, and for 64% it was assessed as “optimal.” An increase in the number of orders is recorded by 17% of construction companies, but 19% report a reduction in the number of construction contracts (balance of opinions – minus 2%, a quarter earlier – minus 3%).

The staffing situation in the industry looks ambiguous. As in the previous quarter, 24% of companies report a shortage of qualified employees, however, as analysts note, “it is not yet possible to say with absolute certainty that a fundamental shortage of personnel has arisen in the construction industry.” Companies have recently reduced the volume of staff reductions rather than expanding their workforce. 14% increased hiring, and 16% reduced it.

The business potential index for construction companies continues to recover after a short-term decline in the middle of the year, amounting to 99.9% versus 99.8% a quarter earlier. This trajectory, experts note, indicates the unfolding of changes during January-March that will help build entrepreneurial confidence and further expand the adaptive capabilities of companies.

Evgenia Kryuchkova