Sep 04 2016 0Comment
FNB Confidence Index

Building confidence shows slight uptick

Cape Town – Although the FNB/BER Building Confidence Index has shown a slight increase, more than 60% of respondents are dissatisfied with prevailing business conditions.

After falling to 34 in the second quarter of 2016, the index lifted by 4 points to 38 in the third quarter. This returns it to the level recorded in the first quarter, with all the sub-sectors – excluding building sub-contractors – registering higher confidence in the quarter.

Main contractor confidence rose to its highest level in more than a year to 44 in 3Q2016, from 38 in 2Q2016. “Confidence moved higher primarily due to an increase in profitability,” said FNB property economist John Loos.

The  profitability boost came about through less keen tendering price competition, as building activity was largely unchanged from 2Q2016. But there are encouraging signs for the near-term outlook, as according to Loos “a decreasing number of respondents indicated that the lack of demand for new work is constraining business operations”.

With many of the results for the residential market standing at, or close to, their long-term averages, the non-residential market is looking increasingly weak. “One could argue that the residential market is now registering normal growth in building activity and profitability,” said Loos. Residential main contractor confidence jumped 10 index points during the quarter to 49. The confidence of non-residential main contractors edged lower to 32 index points, from 34 in 2Q2016.

The confidence of manufacturers of building material rose by 3 index points to 21 in 3Q2016. The underlying information suggests this figure could have been higher, with production volumes and domestic orders faring well. However, excess capacity remains a concern.

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