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Johannesburg - After a moderate decline in the third quarter of 2007, the FNB Building Confidence Index increased by one index point to a level of 86 in the fourth quarter of 2007.
FNB chief economist Cees Bruggemans said that the slight improvement in overall business confidence was the net result of a rise in confidence levels of quantity surveyors, manufacturers and retailers of building materials, while that of architects, building sub-contractors and wholesalers of building materials weakened during the fourth quarter of 2007. In the case of building contractors, confidence levels remained unchanged during the survey quarter.
Although the business confidence of residential building contractors remained stable in the fourth quarter of 2007, a closer inspection of the survey data revealed that business conditions deteriorated notably during the past quarter.
According to Bruggemans, the growth in building activity turned out well below expectations. The tighter demand conditions reported by the respondents to the survey resulted in an escalation in tendering competition when trying to procure new work.
As a result, profit margins are under pressure and the survey results reveal that the overall profitability of companies is deteriorating. Expectations are that this trend is likely to
continue in the first quarter of 2008.
With building demand for residential space weakening, the lower levels of building activity forced survey respondents to reduce the number of people employed. In this regard, a net 11% of participants indicated that the growth in employment has slowed and further job shedding is expected to take place over the short term.
Overall, the respondents to the survey indicated that business
conditions were likely to remain tight and they expect a further
deterioration in the first quarter of 2008.
The FNB Building Confidence Index measures the business confidence of all the major role players and suppliers involved in the building industry such as architects, quantity surveyors, contractors, sub-contractors, wholesale and retail merchants, and manufacturers of building materials.
The index is compiled quarterly from building, manufacturing, retail and wholesale opinion surveys undertaken by the Bureau for Economic Research (BER) at Stellenbosch University. The BER business survey in the building industry was conducted between October 22 and November 16, 2007.
- I-Net Bridge