Construction index: business activity slows slightly
Sales in the main construction sector are likely to fall in the second quarter of the current year. According to the Swiss Construction Index, sales are expected to be just under three percent below the level of the prior-year quarter.
In the second quarter of 2017, the construction index falls by four points from a high level and still reaches 140 points. The expected seasonally adjusted sales of the main construction industry are thus 2.9 percent below the level of the second quarter of 2016, according to Credit Suisse and the Swiss Association of Master Builders (SBC), which collect the construction index on a quarterly basis.
The decline in the second quarter was mainly due to civil engineering (-4.2%), which was unable to maintain the very high level of recent quarters, the statement said. However, this is likely to be a temporary normalization and not a long-term trend reversal in civil engineering activity.
Building construction benefits from interest in investment properties
Building construction sales are expected to decline only slightly in the second quarter compared to the previous quarter (-1.6%), mainly due to a decline in public sector construction projects.
For the remainder of the year, SBC and Credit Suisse expect a continuation of the good business trend in building construction. This will continue to be driven strongly by investments in investment properties, which generate comparatively attractive returns in the prevailing negative interest rate environment.
As long as investors are prepared to accept the risks in the form of rising vacancy rates, a trend reversal is not to be expected, the report continues. This is only likely to happen if real estate loses its appeal as an asset class, for example if the Swiss National Bank abandons its negative interest rate policy. However, SBC and Credit Suisse do not expect such an interest rate move within the next twelve months.
