Drop in confidence in building industry, BER survey shows

CONFIDENCE in the building industry slumped sharply in the second quarter of this year, with almost 70 percent of respondents to the FNB-Bureau for Economic Research (BER) building confidence index survey indicating they were dissatisfied with prevailing business conditions.

FNB-BER revealed yesterday the index dropped 11 index points on a 100-point scale to 32 in the second quarter from 43 index points in the previous quarter, which was the highest index level in more than a year.

All sub-sectors measured registered a drop in confidence.

John Loos, a property economist at FNB, said this had only happened five times previously since the index was first compiled in 1997.

“The broad-based nature of the decline in confidence suggest the sector is facing increasing pressure from a number of fronts. The results (in the sub-sectors) are reasonably consistent in that they point towards a further contraction in the building sector in the second quarter,” he said.

The survey results cover six sectors and reflect the percentage of architects, quantity surveyors, main contractors, sub-contractors, manufacturers of building materials and retailers of material and hardware who were satisfied with prevailing business conditions.

Afrimat, the listed open-pit mining group and industrial minerals and construction materials supplier, yesterday also released its construction index, which revealed that confidence declined to 122.7 in the first quarter of this year from an eight-quarter high of 127 in the fourth quarter of last year.

This index is compiled by economist Roelof Botha for Afrimat and is a composite index of the level of activity in the building and construction sectors.

Botha said yesterday that despite the decline in the index, the construction sector at large remained on a stronger footing than seven years ago, with the index having expanded by 22.7 percent since the third quarter of 2010.

This was was more than double the rate of growth of the economy as a whole, he said.

Botha added that the composite index provided a balanced and realistic view of the level of activity in the construction sector because it evened out the contradictory trends of conditions portrayed by the individual components that made up the index.

However, Botha said confidence levels, as reflected by the index, were likely to remain under pressure during the second quarter because of the declining trend in overall business confidence, socio-political unrest and the delay by the SA Reserve Bank in adopting a more accommodating approach towards monetary policy.

The steepest decline in the FNB-BER index was reported by hardware retailers, whose confidence levels dropped by 24 index points to 13, the joint lowest level since the second quarter of 2012.

Loos said the woes in the hardware sector was consistent with the broader retail environment, which was suffering because of constrained consumer spending.