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Jun 12, 2012

Second-quarter building confidence falls

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First National Bank|Cees Bruggemans
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Building confidence in the second quarter of 2012 fell to 27 points after increasing to 34 points in the first quarter, as perception of the industry falters, First National Bank (FNB) and the Bureau for Economic Research (BER) reported on Tuesday.

However, despite the fall in confidence, with 7 out of 10 respondents in different sectors of the building industry rating the prevailing business conditions as unsatisfactory, the index remained higher than that recorded for most of 2011.

The FNB/BER business confidence index results found that despite steady performance in the building sector during the second quarter of the year, the industry held no improvements as was anticipated – highlighting the slow, somewhat hesitant nature of the building sector recovery.

“The underlying data on activity and profitability does not suggest that the recovery has stalled, rather that the pace of the recovery remains very slow,” said FNB economist Cees Bruggemans.

Further, he added that increased domestic and global uncertainty may have dampened confidence and contributed to the divergence between confidence and activity.

Nonresidential contractors recorded the largest shift in confidence with a decrease from 38 index points to 19 during the second quarter, while the confidence of residential contractors remained largely flat, decreasing by 2 index points, from 28 to 26.

Bruggemans pointed out that the nonresidential sector continued to outperform the residential sector with no indication of a slowdown in the sector.

The business confidence of main contractors fell 7 index points to 24 points, while subcontractor confidence rose from 29 to 32 index points. Business confidence among architects and subcontractors rose by 13 and 3 index points, respectively.

The index reported another significant drop in confidence from building material and hardware retailers, with -29 index points, followed by manufacturers at -17, main contractors at -7 and quantity surveyors at -5.

“Despite the 7 index point decline in building confidence, the underlying information about activity and profitability suggests that the recovery is still on track, but, at a very sluggish pace, perhaps even slower than previously thought,” said Bruggemans.

He concluded that the mixed overall results, with some areas of the building sector performing better than others, pointed to continued difficulties within the sector and that recovery was still in a vulnerable state.

 

Edited by: Mariaan Webb
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