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Construction Sector Indices Statistical Release (22nd Series of the Release) By Peter Opio Principal Statistician, Ener...

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Construction Sector Indices Statistical Release (22nd Series of the Release)

By Peter Opio Principal Statistician, Energy & Infrastructure 17th November, 2011

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Order of Presentation Background The CSI The CSI Categories Basic Headings Processing the Indices Major Uses Findings 2

Background For sometime before 2005, there was a need for a set of Construction Sector Indices (CSIs) especially covering the development of prices IN 2005, a project was conceived to address the above need The plan was to set up a permanent system of construction statistics Also, to enhance the capacity of UBOS staff (skills and experience) to develop and maintain a permanent system of CSIs 3

The Construction Sector Indices Construction Sector Indices (CSI) σ

Provide measures of average changes in the prices of inputs to the construction sector.

The CSI used to be produced quarterly but because of the high demand for macroeconomic indicators, we now release the indices every two months 4

The CSI Categories They are the categories for which composite indices are compiled and published. They represent different types of construction Overall construction sector Buildings (residential and non-residential) Residential buildings Formal sector residential buildings Own-account residential buildings Non-residential buildings Civil works Roads (paved) Roads (gravel) Water projects 5

Basic Headings (Inputs) These are the components used to compile the composite indices. They include: A B C D E F G H J K L M N P Q W X

Sawn timber Paint PVC/HDPE pipes Water tanks (non-metallic) Burnt clay bricks and tiles Cement Concrete articles (blocks, pavers, kerb stones and culverts) Steel bars (reinforcing) Roofing sheets Other iron and steel building materials Electrical wire/cable Quarry products (aggregate, hardcore, stone dust, sand) Road lime Bitumen Fuel (diesel) Labour Equipment 6

Processing of the Indices Price Data is obtained from existing sources: δ δ δ

Within UBOS, selected oil companies and a number of construction companies.

• The data is then processed to produce the CSI.

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Major Uses of the Indices To monitor the cost of construction work overtime To enable monthly price escalation payments to be calculated on large construction contracts. To determine likely contract prices given changes over time in the cost of construction work, and To understand the contribution the sector is making to developments in the national economy. 8

FINDINGS FOR AUGUST AND SEPTEMBER, 2011 9

WHOLE SECTOR, 35.3%

Residential Buildings, 33.6%

Non-Residential Buildings,

Civil Works, 32.4%

37.5% Roads Paved, 31.8%

Roads Gravel, 35.9%

Water Projects, 30.2%

Annual Whole Sector price changes, up by 35.3% in Sept 2011 The Annual Whole Sector price index for construction works rose by: δ

35.3% for the year ending September, 2011 and

δ

31.4% for the year ending August, 2011 11

Annual Whole Sector Price trend up by 35.3% in September 2011 Price Trend, September'10 to September'11 250

150

100

50

Se p11

A ug -1 1

Ju l-1 1

Ju n11

M ay -1 1

A pr -1 1

M ar -1 1

Fe b11

Ja n11

D ec -1 0

N ov -1 0

O ct -1 0

0 Se p10

Price Indices

200

Months

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Main contributors to the 35.3% annual change Notable average price increases were in all sub sectors of Construction works: Residential Buildings by 33.6% as a result of increases in: δ Wages by 69.0% δ Cement by 28.0% δ Timber by 23.0% and δ PVC & HDPE Pipes by 21.6% Non-Residential Buildings by 37.5% as a result of increases in: δ Wages by 69.0% δ Electrical Wire & Cable by 64.2% δ Burnt Clay Bricks and Tiles by 44.3% δ Cement by 28% and δ Timber by 23.0% 13

Main contributors to the 35.3% annual change, con’d Civil Works by 32.4% as a result of price increases in: δ

Roads Paved by 31.8% contributed by a rise of σ 69.0% - Wages σ 53.0% - Bitumen and σ 52.9% - Diesel

δ

Roads gravel by 35.9% contributed by a rise of σ 69.0% - Wages and σ 52.9% - Diesel

δ

Water Projects by 30.2% contributed by a rise of σ 69.0% - Wages and σ 21.6% - PVC & HDPE Pipes

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Monthly Price Changes at Whole Sector Level, up by 2.5% in Sept 2011 Monthly price changes for the Whole Sector shows that the price index for construction works rose by: 2.5% in September 2011 as compared to August 2011 3.3% in August 2011 as compared to July 2011

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WHOLE SECTOR, 2.5%

Residential Buildings, 2.8%

Non-Residential Buildings,

Civil Works, 1.7%

2.6% Roads Paved, 1.9%

Roads Gravel, 1.4%

Water Projects, 1.5%

Main Contributors of inputs to the 2.5% monthly increase Notable average price increases were in all sub sectors of construction works: Residential Buildings by 2.8% as a result of increases in: δ Cement by 6.4% δ Wage rates by 4.8% δ Concrete Products by 1.7% Non-Residential Buildings by 2.6% as a result of increases in: δ Cement by 6.4% δ Wage rates by 4.8% δ Electrical Wire & Cable by 4.1% δ Timber by 1.5% Civil Works by 1.7% as a result of increases in: δ Roads Paved by 1.9% contributed by 4.8% (Wages) & 1.7% (Diesel) δ Roads Gravel by 1.4% contributed by 1.7% (Diesel) δ Water Projects by 1.5% contributed by 4.8% (Wages) 17

Reasons for monthly general price increase Lime (9.3%) Cement (6.4%) Wage Rates (4.8%) Other Iron & Steel (4.6%) Electrical Wire & Cable and Water tanks (4.1%)

Lime-Increased costs of importation Cement-Reduced production Wage Rates-Increased costs of living Increased cost of Imported raw materials

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Implications This implies one had to pay more by 35% in September 2011 than in September 2010 for the same basket of inputs into construction It also implies one had to pay more by 2.5% in September 2011 than in August 2011 for the same basket of inputs into construction 19

Growth of Construction in the Economy Net Domestic Supply of Cement Cement quantities give an indication of the growth of construction in the economy Net Domestic Supply of Cement registered a decrease of 9.4% in September 2011 as compared to an increase of approximately 2.6% in August 2011. 180

Thousand tons

160 140 120 100 80 60 40 20 0 Production

June'11

Imports

July'11

Exports

Aug'11

Net Domestic supply

Sept'11

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Cement Quantities Period Production

June'11

July'11

Aug'11

Monthly Sept'11 % Change

145.22

147.56

155.25

143.12

-7.8%

Imports

48.28

52.27

51.30

46.96

-8.5%

Exports Net Domestic supply Monthly Change

46.04

46.16

48.83

47.17

-3.4%

157.72

142.91

-9.4%

147.46 3.8%

Note: Quantities in thousand tons

153.67 4.2%

2.6%

-9.4%

In Sept 2011, net domestic cement supply decreased by 9.4% compared to Aug 2011. In Aug 2011, there was an increase in supply by 2.6% as compared to July 2011. The decrease in net supply in Sept by 9.4% was due to reduced factory production resulting from load shedding

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Conclusion The Annual Whole Sector price index for construction works rose by 35.3% for the year ending September 2011 compared to September 2010 Monthly price changes for the Whole Sector shows that the price index for construction works rose by 2.5% in September 2011 compared to August 2011 22

The next release will be on Wednesday, 22nd February 2012

Thank you 23