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Despite having bottomed out in the first quarter, the sector is showing an erratic pace. Primary activity data showed a new drop in October after the weak recovery of the previous months. Why it is struggling to recover.
construction
Construction in the northwest of the country had its event at Expo NOA | Bloomberg
Once the scenario of a V-shaped rebound in economic activity has been discarded, construction is exhibiting erratic behaviour with advances and setbacks in its statistics. Beyond the monthly recovery that is perceived in other sectors, the construction sector is moving in a zigzag pattern, is unable to get on board the upturn and once again posted negative data in October.
The National Institute of Statistics and Census (INDEC) will announce on November 7 the indicators of the economic situation of construction activity (ISAC) corresponding to September. Private estimates anticipate that the sector showed positive signs in the ninth month of the year. However, this improvement would have been reversed the following month, according to primary activity data.
“Mortgage credit is still not working,” said the president of the Confederation of Small and Medium-sized Construction Companies
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Construction shows negative signs again
The Construya Index (IC), which records the evolution of the volumes of inputs sold by the private sector, experienced a seasonally adjusted monthly decline of 2.79% in October and a collapse of 28.20% compared to the same period last year.
"After having hit a low point last March, and after several months of significant recovery, shipments of construction materials to the commercial channel decreased again in October. Demand for materials for residential construction is increasing at a very gradual pace," the entity indicated.
The cumulative total for the first ten months of the year thus showed a year-on-year contraction of 28.7%. Although the seasonally adjusted monthly statistics allow us to more effectively identify the current dynamics, the construction industry lost more than a quarter of its sales power in the last year.
It is worth noting that the index mentioned includes a series of products marketed by the leading companies of the Construya Group: ceramic bricks, Portland cement, lime, long steel, aluminum carpentry, adhesives and pastes, waterproofing paints, sanitary ware, boilers and home systems and central heating, taps and water pipes, ceramic floors and coverings.
Build in October Index
Another data from the Portland Cement Manufacturers Association (AFCB) shows a decline in this vital input for construction. Shipments fell 1.1% monthly and 20% year-on-year in October. They have also accumulated a -26.2% decline so far in 2024. At the same time, consumption showed a drop of 1.3% compared to September and 19.9% ??compared to the same month in 2023. The cumulative drop in the first 10 months of the year is 26.3%.
Regarding these numbers, a report by the consulting firm Outlier stated that “the seasonally adjusted series fell 7.2% monthly and returned to the levels of June 2024.” Meanwhile, analysts highlighted that “the recovery after the March bottom and the subsequent 5-month saw-saw around levels similar to June-September 2020 (pandemic) is already quite visible as a sectoral pattern.”
The reasons behind the fall in construction
The economic program designed and executed by President Javier Milei and the Minister of Economy Luis Caputo included a drastic reduction in public works. The cut in the transfer of resources to the provinces to finance infrastructure projects was felt more strongly in the first months of the libertarian administration and had a full impact on the sector, being the most affected in terms of unemployment.
A report by Politikon Chaco found that the funds of the National State destined for construction (which represent 66% of real direct investment) suffered a 79.8% year-on-year collapse in real terms, discounting the effect of inflation, until September.
Cement shipments in October
"Breaking down direct real investment, the Construction investment showed a paid execution of $202,519 million when in the first half of 2023 it was $269,217 million. The nominal interannual variation is -24.8% and in real terms, -79.8%," the study explains.
And he adds: "In turn, the "Others" component (which includes machinery and equipment, safety equipment, cattle and various others) totaled $102,433 million when in 2023 it was $140,886 million, thus registering a nominal year-on-year variation of -27.3% and -79.2% in real terms."
Specifically, construction appears to have hit its lowest point in the first quarter of 2024, although since then it has shown an uneven pace with ups and downs, drawing a pattern similar to that of a "W" and definitively burying the "V" recovery that the Government was enthusiastic about.
For Outlier economists, the sectors performance is linked to the existence of a significant stock of new and used unsold units, the increase in costs in dollars, a recovery of credit that in the case of mortgages is even more incipient, the low execution of public works at a national level and a change in relative prices. |
