By Richard Mann, Contributing Reporter
RIO DE JANEIRO, BRAZIL – Civil construction, one of the economy’s main drivers and still employing millions of people, has lost steam since the beginning of the year.
The sector expected its GDP to grow 2 percent in 2019. Now, the estimate is 0.5 to 1 percent. The projected number of jobs created in the year also dropped from 100,000 to 25,000.
It was the sector’s twentieth consecutive drop in activity, according to data from IBGE (Brazilian Institute of Geography and Statistics).
In the last five years, construction GDP has already decreased 28 percent, according to SindusCon-SP (São Paulo State Civil Construction Industry Syndicate).
The Construction Confidence Index (ICST), measured by the Getulio Vargas Foundation (FGV) fell 1.8 points in May to 80.7 points, the lowest level since September last year (80.4 points).
After a period of strong contraction in the labor market — between December 2013 and December 2018, when construction companies laid off about 1.2 million workers — companies had started hiring this year, prompting SindusCon-SP to expect growth for 2019. But when faced with negative numbers, the organization had to revise downwards.
In the last two months of 2018, the sector fired 80,000 workers in Brazil. In the first four months of 2019, it hired only 40,000, according to data from the official Registry of Employed and Unemployed (Caged).
Currently, approximately 2.5 million people work in the civil construction sector. However, with confidence declining, it is now impossible to expand this number, according to Eduardo Zaidan, president of SindusCon-SP.
Furthermore, modest growth should be leveraged by the informal construction sector (neighbor helps neighbor, relative helps relative) and through small renovations and improvements in real estate, which do not generate employment.
Construction companies will record negative results, helping little or nothing in expanding the sector.
Construction GDP (everything encompassing a construction project, from its conception to its completion) is roughly between R$227.5 (US$57) billion and R$260 billion, currently about 3.5 to 4 percent of Brazil’s expected total GDP of R$6.5 trillion for this year.
For Zaidan, the country will only begin to grow when it can increase its economic productivity. Companies will not invest before that.
The Brazilian Chamber of the Construction Work Industry (CBIC) and Senai released the National Real Estate Indicators’ first quarter of 2019 survey on May 27th.
Key data shows an adverse scenario:
- Releases increased by 4.2 percent compared to the first quarter of 2018 but dropped 62.5 percent compared to last quarter of 2018.
- Sales rose 9.7 percent compared to the first quarter of 2018 but fell 18.9 percent compared to the last quarter of 2018.
- 14,680 residential units were introduced in the first quarter of 2019; the average of the last four quarters is 27,227.