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Building confidence increases - FNB

Cape Town - The Building Confidence Index rose by five points during the first quarter of this year, the highest since 2010, First National Bank (FNB) and the Bureau for Economic Research (BER) said on Tuesday.

"Although the index increased, the current level suggests that on average more than six out of 10 respondents in different sectors of the building industry still rated prevailing business conditions as unsatisfactory."

The index rose from 32 in the fourth quarter of 2012 to 37 in the first quarter of 2013.

The index, which is compiled by FNB and BER, can vary between zero (indicating an extreme lack of confidence) and 100 (extreme confidence).

Compared to the fourth quarter, the following changes in confidence levels took place: retailers of building materials (+12), manufacturers of building materials (+10), architects (+9), main contractors (+2), quantity surveyors (+2), and sub-contractors (-1).

Confidence among main contractors rose by two points to 30.

Building activity expanded at its highest rate since the start of the recession in 2008, in line with expectations. The rise in activity was more pronounced with non-residential contractors than residential contractors.

"However, the profit margins of non-residential contractors came under renewed pressure despite the rise in building activity. In contrast, profitability of residential contractors improved."

The demand for building materials increased during the first quarter, which resulted in the increased confidence of building material retailers, at 59 index points.

"The increase in building activity of main contractors seems to be leading to higher growth in building material sales. However, further sales growth could be inhibited if consumer finances come under more pressure," FNB chief economist Sizwe Nxedlana said.

Similarly, the confidence of building material manufacturers increased from 11 to 21 index points.

The building pipeline seemed more robust than in the last few quarters and this boded well for the sustainability of building recovery.

"However, it must be noted that although the results confirm that the building upturn is gaining momentum, current levels suggest that it will continue to be subdued."

Building material retailers could also be affected if consumer finances deteriorated.



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