Windhoek — The construction industry is battling to survive. This situation suppresses overall business confidence in the country. The industry went down 28 percent in terms of the total value of contracts completed as of July 2010, compared to the previous year.

The industry has only done work worth N$76 million in the months up to July 2010. In 2009, the construction industry completed construction work worth N$106 million by July.

The figures are from the newly released IJG Business Climate Monitor for July, which monitors business climate in the country. Namibia's think tank, Institute for Public Policy Research compiles the monthly monitor.

The below-average performance by the construction industry has driven the investment index down to 3.3 basis points. The building index itself is down 30.6 basis points.

Although credit extensions to consumers are up and the sales of new vehicles continue to grow year-on-year, poor performance in the construction industry weighs down the overall positive increases in the economy.

"Setbacks in the construction industry outweighed the positive increases in credit extension to businesses, the NSX local index and commercial vehicle sales," noted the IJG Business Climate Monitor for July.

Credit extension to consumers continues to show encouraging signs, with growth accelerating to 7.6 percent year-on-year, with most of the growth coming from the mortgage space.

Although new passenger vehicle sales were down 5 percent month-on-month, new passenger vehicle sales continue to grow over the longer term and are thus up 47 percent year-on-year.

Economic leading indicator also took a hammering in July, losing 9 basis points due to a fall in defensive name registrations, which fell by 22 percent.

Nevertheless, the export index increased 2.3 basis points from a stronger Euro and better exports prices as economic conditions stabilised in export markets. The overall index went down 0.8 basis points.

"Although the index was slightly in the red, the three-month moving average progressed into positive territory, thus entering a short-term growth cycle," says the IJG Business Climate Monitor for July.

The Euro appreciated by 1.54 percent in July, while metal prices went up 11 percent on average. Value for copper increased 10 percent, zinc 13 percent and uranium 10 percent.

The US dollar weakened in the month, and as a result increased revenues in local currency to 6 percent.

Fish prices were up 4 percent and lamb prices climbed 12 percent, due to the good uptake and limited supplies on international markets. Despite low inflation and lower interest rates, the consumption index remained unchanged.

Inflation came in at 4.6 percent and, although within inflation targets, this figure was higher than expected.

Inflation was driven by a shortage of potatoes in South Africa and hence vegetable inflation shot up 13 percent month-on-month.

The prime-lending rate fell slightly, as Bank Windhoek acknowledged regulatory pressure to narrow interest rate spreads before Bank of Namibia's October 31 deadline.

"But due to improvements in oil prices, credit to business, the NSX local index, commercial vehicle sales and metal futures, we remain positive about business sentiment going forward and expect the short-term growth cycle to remain positive in the third quarter," concluded the IJG Business Climate Monitor for July.