Activity growth to remain under pressure as confidence wanes

A GAUGE of South African builder confidence fell sharply in the first quarter of this year, dragged down by weak demand.

Data from the FNB/Bureau for Economic Research (BER) released yesterday showed that the sentiment declined by 7 points to reach an almost eight-year low of 25 during the period, way below the 50-point neutral mark for 15 consecutive quarters.

The six sub-sectors that comprise the index saw varied sentiment in the quarter under review.

The main contractor confidence index plummeted to 23 points, from 32 points in the last quarter of 2018.

Sentiment among manufacturers of building materials plunged 24 points to 19 points – the biggest decline in four years – while hardware recorded a 23 points decline.

The sub-contractor sector eased to 21 points, from 39 points in the previous quarter.

Only architects and quantity surveyors showed improved sentiment in the period.

Siphamandla Mkhwanazi, property economist at FNB, said overall, the building pipeline suggested that building activity growth would remain under pressure in the short to medium term.

“Building activity has been poor for a number of quarters, and in a way it was difficult to see how it could deteriorate further to such an extent. However, that is what transpired this quarter.

“A recovery, if one were to only look at this survey, is still some way off,” said Mkhwanazi.

A recovery, if one were to only look at this survey, is still some way off.

Siphamandla Mkhwanazi FNB property economist

Financial results from listed hardware retailers have shown that trading in the hardware and building materials segment remains tough.

Building materials retailer Cashbuild last month said its operating profits plunged 12 percent in the six months ended December and warned that “weak trading conditions are set to continue, mainly on the back of levels of personal indebtedness, high unemployment and other unfavourable macro-economic conditions”.

Massbuild, the do-it-yourself division of Massmart, reported a measly 1.8 percent gain to R749.1 million in trading for the year ended December. However, Spar’s Build It grew sales by 10.3 percent in the three months ended January.

Statistics SA was expected to release retail sales data for January this week.

The decline in sales for general dealers, hardware, paint and glass led to the decline in retail sales in December.

Meanwhile, cement trade data for January from Industry Insights showed imports of cement into South Africa increased by 61.2 percent year-onyear in January, compared to the same period in 2018.

Industry Insights said imports from Vietnam currently pose the biggest risk to the local market.