The First National Bank (FNB) and Bureau for Economic Research Building Confidence Index fell by 11 index points to 41 during the second quarter of the year, halting the momentum gained by the sector during the first quarter.

During the second quarter, confidence in all of the index’s subsectors was lower, with the confidence of building material manufacturers having registered the biggest fall.

The decline in building material manufacturers' confidence was largely owing to weaker domestic demand, with domestic sales and orders received significantly lower than in the first quarter.

And, while the export market remained buoyant; it was not enough to boost confidence.

“The slowdown in domestic demand could also partly be owing to the prolonged labour unrest in the platinum sector and, while exports, mainly to the rest of Africa, remained robust, volumes are small compared with the domestic market,” FNB property economist John Loos said.

The weakness in the domestic building sector was further reflected in the activity of main contractors, with building activity for residential and nonresidential main contractors having declined during the quarter under review.

The confidence of main contractors edged lower to 45 index points during the second quarter, from 49 index points in the first quarter.

“While a further decline in residential building activity was expected, the slowdown in nonresidential activity, which, up until now, helped lift the sector, was surprising. This will certainly weigh on the outlook going forward,” Loos said.

However, despite the fall in activity, overall profitability improved.

Loos said this was possibly as a result of firms increasing their margins, especially in the residential sector.

“However, given the continued weakness in building demand this may not be sustainable,” he cautioned.

Meanwhile, after increasing during the first quarter, the confidence of architects and quantity surveyors declined to 47 and 45 index points respectively during the second quarter.

The confidence of quantity surveyors especially worsened noticeably during the period under review, indicating that the building pipeline had deteriorated during the quarter.

“The slowdown in activity in the building pipeline suggests that the underperformance of the building sector seen this quarter may continue for the rest of the year,” Loos stated.

Further, confidence of building subcontractors fell to 43 index points, from 47 previously, while the confidence of retailers of building material edged lower to 55 index points.

Therefore, while this index was lower, the majority of respondents in the sector were still satisfied with prevailing business conditions. However, much of the optimism in the sector was as a result of a rise in order volumes, while growth in sales moderated.

“It is interesting to see the confidence of retailers remain relatively high. However, they represent only a small portion of the overall building sector,” Loos said.

FNB noted that, while the results regarding the building pipeline were mixed, on balance it was negative, dampening the outlook for the sector in future.

In addition, weaker economic growth would also weigh on the sector.