Confidence in building industry falls
Confidence in the building sector has plummeted in the first quarter of 2024 from 43 to 27 – and it seems the sector also does not have much confidence for the future, either.
Four of the six sectors surveyed recorded a decline in sentiment of more than 20 points, although main contractor confidence ticked up marginally amid a stabilisation in activity.
After increasing to its highest level in eight years in the fourth quarter of 2023, the FNB/BER Building Confidence Index, which measures sentiment in the building sector, fell by 16 points to the joint lowest level since mid-2020.
The current level of the index means more than 70% of respondents are dissatisfied with prevailing business conditions.
The index can vary between zero, indicating an extreme lack of confidence and 100, indicating extreme confidence.
It reveals the percentage of respondents who are satisfied with prevailing business conditions in six sectors – architects; quantity surveyors; main contractors; subcontractors such as plumbers, electricians, carpenters and shop fitters; manufacturers of building materials; and retailers of building materials and hardware.
It is alarming that most of the subsectors saw a marked fall in confidence. Compared to the fourth quarter of 2023, the confidence of building material manufacturers nosedived by 29 index points, building subcontractors as well as architects by 25 index points and hardware retailers by 23 index points.
The confidence of main contractors increased by one index point and quantity surveyors recorded an uptick in confidence of four index points. Architects registered the biggest turnaround by far in the first quarter. While 54% of architects were satisfied with prevailing business conditions in the fourth quarter, this time only 29% said they are, in line with a sharp deterioration in current as well as near-term outlook for activity.
“The change in sentiment brings the level back to what it was in the third quarter of 2023,” says Siphamandla Mkhwanazi, senior economist at FNB.
“It is easy then to claim that the last quarter’s reading was an outlier. However, the trend, in terms of activity, was similarly volatile, suggesting there may indeed have been a sudden and unexpected shift in architectural work.”
On the other hand, confidence among quantity surveyors increased to 42 index points from 38 in the fourth quarter. Main contractor confidence increased marginally to 42 index points, from 41 in the fourth quarter.
“However, looking closer, an improvement in residential building activity was partially offset by a somewhat weaker nonresidential building performance.”