Building confidence increased during the third quarter of the year from 41 to 48 index points, to reach its highest level in five years, despite a slowdown in activity with regard to main contractors and subcontractors, the latest First National Bank (FNB)/Bureau for Economic Research (BER) building confidence index has shown.

The index indicated that there was an even split between those respondents that were satisfied with prevailing business conditions and those that were not.

Main contractors’ confidence levels declined slightly during the third quarter to 43 index points, after it had jumped by 15 points to 45 during the second quarter, as third-quarter growth in building activity slowed down considerably compared with that of the second quarter.

“This does not mean that the building recovery has stalled. The underlying trend is up. However, it seems that growth was more subdued in the third quarter, following a relatively good second quarter,” FNB chief economist Sizwe Nxedlana said. 

The slowdown in building activity was more pronounced in the nonresidential sector, with the residential sector outperforming the nonresidential sector during the quarter.

Similarly, activity in the subcontractor segment also eased, which resulted in a decline in confidence among these contractors, from 41 index points in the second quarter, to 39 points in the third quarter.

However, although main contractor, and to a lesser extent subcontractor, activity had slowed down during the quarter, smaller, informal projects continued to support the sector, which was reflected in the confidence among building retailers that increased from 46 to 56 points in the third quarter.

“The rebound in confidence was largely owing to a marked uptick in sales and profitability,” the FNB/BER index stated.

Meanwhile, an improvement in the retail segment filtered through to building materials manufacturers, with a rise in domestic sales and domestic sales orders contributing to a sharp increase in confidence from 27 index points in the second quarter to 56 points in the third quarter.

“The continued demand from retailers and the anticipation of a more sustained recovery in the building sector seems to have boosted the confidence of building material manufacturers,” Nxedlana said.

Further, confidence of quantity surveyors and architects also improved to 50 and 46 index points respectively.

However, the FNB/BER index stated that, in terms of activity, the picture was mixed, as work by quantity surveyors increased, while that of architects slipped back to first-quarter levels.

“Looking ahead, the building pipeline remains supportive of further growth. However, the recovery in building activity is likely to be modest, given the headwinds confronting the sector in the form of lacklustre economic growth, slower growth in consumer spending and, more recently, labour unrest,” FNB said.