Slight dent in building confidence

2012-09-10 10:21

Johannesburg - Building confidence dipped slightly lower in the third quarter of the year, First National Bank and the Bureau for Economic Research said on Monday.

The FNB/BER building confidence index shed one point, registering a value of 26 index points for the third quarter, compared with 27 in the previous quarter.

“The current level of the index suggests more than seven out of ten respondents in different sectors of the building industry rate prevailing business conditions as unsatisfactory,” FNB said.

The momentum of a recovery in activity levels remained hesitant during the quarter.

Unlike previous quarters, there were no major movements in confidence of the index's components.

Architects, quantity surveyors, main contractors, sub-contractors, building material manufacturers and building and hardware retailers were surveyed.

Confidence across all sectors remained largely stable.

“Residential confidence rose from 26 to 28 index points, while non-residential confidence inched 1 index point higher to 20,” FNB said.

“Overall, main contractor confidence rose from 24 to 26 index points.”

Underlying activity indices continued to favour the perception of slower growth in the residential sector compared with the non-residential sector, which was unusual.

Activity had continued to improve within the non-residential sector, boosted by increased provincial and municipal spending.

“The rise in residential activity continued to be more restrained,” said FNB.

This probably reflected difficulties faced by households in the middle and upper segments in obtaining mortgage loans.

"Notwithstanding rising activity levels, the weak building demand highlights the risk that the building recovery may remain subdued for longer," said FNB economist Cees Bruggemans.

Architect confidence remained unchanged, at 30 index points in the second and third quarter.

But activity declines across all phases of the architect pipeline during the third quarter indicated building work to come.

Combined with prevailing weak demand, this again suggested a continuation of the current slow recovery, rather than a more robust one.

Quantity surveyor activity levels rose more than expected, but this did not greatly affect confidence.

Building material and hardware merchants' confidence gained a meagre 2 index points to 13 during the third quarter.

Sales had improved, but relatively high purchasing price increases pushed down profitability and kept confidence low.

Building material manufacturers confidence eased to 17 index points from 20 points during 2Q2012. The slight drop in confidence was reinforced by softening in domestic sales and production during 3Q2012.

Sub-contractor confidence was also lower, shedding 3 index points to 29 during 3Q2012.

Results for the third quarter suggested that the building recovery remained hesitant.

Building activity levels of main contractors and retail sales of building materials and hardware improved during the quarter.

Manufacturing sales and production slowed but remained positive.

Weak demand and signs of slowing activity at the start of the building supply chain could further hamper the pace of the recovery.

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