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Building industry loses some steam

Johannesburg - There seems to be an even split in the building industry between those satisfied with prevailing business conditions and those who are not, according to the latest FNB/BER building confidence index.

Despite the rise in confidence in the third quarter of 2013, other indicators, especially main contractor activity, suggest that the growth momentum in the building sector returned to the more subdued pace seen in the first quarter.

The index shows that the recovery in the building industry has lost some steam in the third quarter of 2013, but overall momentum seems to be up.

The index rose from 41 index points in the second quarter to 48 index points in the third quarter, the highest level of the index in five years.

Compared to the second quarter confidence was higher despite a slowdown in activity in three of the sub-components, namely main contractors, sub-contractors and architects.

However, smaller projects likely boosted sales of building materials, thereby lifting the confidence of retailers and manufacturers of building materials.
 
Overall, growth in the building sector continued in the third quarter, but at a more modest pace than in the second quarter.

Compared to the second quarter, the confidence levels of manufacturers of building materials increased the most (+25), followed by that of retailers of building materials (+10), quantity surveyors (+7) and architects (+4).

The confidence levels of main contractors decreased (-2) as well as that of sub-contractors (-2).

The growth in building activity slowed down considerably compared to the second quarter. This does not mean that the building recovery has stalled, though, according to Sizwe Nxedlana, chief economist at FNB.

The slowdown in activity was more pronounced in the non-residential sector than in the residential sector.

Similarly, activity in the sub-contractor segment also eased. This resulted in a slight decline in confidence in the third quarter.

The improvement in the retail segment also filtered through to manufacturers of building materials.

A sharp rise in domestic sales and domestic sales orders helped lift confidence of building material manufacturers from 27 to 56 points in the third quarter, its highest level since early 2008.

“The continued demand from retailers and the anticipation of a more sustained recovery in the building sector seems to have boosted the confidence of building material manufacturers,” said Nxedlana.

Work by quantity surveyors increased, while that of architects slipped back, as with main contractors, to levels in the first quarter of the year.

"Looking ahead, the building pipeline remains supportive of further growth," said Nxedlana.

"However, the recovery in building activity is likely to be modest given the headwinds confronting the sector in the form of lacklustre economic growth, slower growth in consumer spending and, more recently, labour unrest."

- Fin24

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