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Johannesburg - Building confidence in SA declined in the second quarter of 2014, largely due to weaker domestic demand, according to the latest FNB/BER building confidence index.
After breaching the key 50-index point mark in the first quarter of 2014 the index fell by 11 points to 41 in the second quarter.
The current level indicates that about 60% of respondents are dissatisfied with prevailing business conditions.
“The 11 point drop in overall building confidence was largely due to a sharp fall in the confidence of building material manufacturers” said John Loos, property economist at FNB.
The decline in confidence was largely due to weaker domestic demand.
Domestic sales and orders received were significantly lower than in the first quarter.
However, the export market remained buoyant, but this was not enough to boost confidence.
“The slowdown in domestic demand could also partly be due to the prolonged labour unrest in the platinum sector and while exports, mainly to the rest of Africa, remained robust, volumes are small in comparison to the domestic market,” said Loos.
Main contractors
The weakness in the domestic building sector is further reflected in the activity of main contractors.
Building activity for both residential and non-residential main contractors declined during the quarter.
As a result, the confidence of main contractors edged lower to 45 index points in the second quarter, from 49 in the first quarter.
“While a further decline in residential building activity was expected, the slowdown in non-residential activity, which up until now helped lift the sector, was surprising. This will certainly weigh on the outlook going forward,” said Loos.
Despite the fall in activity, overall profitability improved.
“This is possibly due to firms increasing their margins, especially in the residential sector. However, given the continued weakness in building demand this may not be sustainable,” said Loos.
Confidence of architects
After rising in the first quarter, the confidence of architects and quantity surveyors declined to 47 and 45 index points respectively.
Although the level of activity for architects was largely unchanged from the first quarter, that of quantity surveyors worsened noticeably.
This means the building pipeline deteriorated during the quarter.
“The slowdown in activity in the building pipeline suggests that the underperformance of the building sector seen this quarter may continue for the rest of the year,” said Loos.
Glimmer of hope
One glimmer of hope remains retailers of building material.
Although confidence edged lower in the second quarter, at 55, the majority of respondents in this sector are still satisfied with prevailing business conditions.
However, much of the optimism in the sector is as a result of a rise in order volumes (to be filled in subsequent quarters), while the growth in sales this quarter moderated.
“It is interesting to see the confidence of retailers remain relatively high. However, they represent only a small portion of the overall building sector,” said Loos.
Lastly, confidence of building sub-contractors fell to 43, from 47 index points in the first quarter.
- Fin24
After breaching the key 50-index point mark in the first quarter of 2014 the index fell by 11 points to 41 in the second quarter.
The current level indicates that about 60% of respondents are dissatisfied with prevailing business conditions.
“The 11 point drop in overall building confidence was largely due to a sharp fall in the confidence of building material manufacturers” said John Loos, property economist at FNB.
The decline in confidence was largely due to weaker domestic demand.
Domestic sales and orders received were significantly lower than in the first quarter.
However, the export market remained buoyant, but this was not enough to boost confidence.
“The slowdown in domestic demand could also partly be due to the prolonged labour unrest in the platinum sector and while exports, mainly to the rest of Africa, remained robust, volumes are small in comparison to the domestic market,” said Loos.
Main contractors
The weakness in the domestic building sector is further reflected in the activity of main contractors.
Building activity for both residential and non-residential main contractors declined during the quarter.
As a result, the confidence of main contractors edged lower to 45 index points in the second quarter, from 49 in the first quarter.
“While a further decline in residential building activity was expected, the slowdown in non-residential activity, which up until now helped lift the sector, was surprising. This will certainly weigh on the outlook going forward,” said Loos.
Despite the fall in activity, overall profitability improved.
“This is possibly due to firms increasing their margins, especially in the residential sector. However, given the continued weakness in building demand this may not be sustainable,” said Loos.
Confidence of architects
After rising in the first quarter, the confidence of architects and quantity surveyors declined to 47 and 45 index points respectively.
Although the level of activity for architects was largely unchanged from the first quarter, that of quantity surveyors worsened noticeably.
This means the building pipeline deteriorated during the quarter.
“The slowdown in activity in the building pipeline suggests that the underperformance of the building sector seen this quarter may continue for the rest of the year,” said Loos.
Glimmer of hope
One glimmer of hope remains retailers of building material.
Although confidence edged lower in the second quarter, at 55, the majority of respondents in this sector are still satisfied with prevailing business conditions.
However, much of the optimism in the sector is as a result of a rise in order volumes (to be filled in subsequent quarters), while the growth in sales this quarter moderated.
“It is interesting to see the confidence of retailers remain relatively high. However, they represent only a small portion of the overall building sector,” said Loos.
Lastly, confidence of building sub-contractors fell to 43, from 47 index points in the first quarter.
- Fin24
