Building sector confidence falls further in 1Q2019

Building sector confidence falls further in 1Q2019

Confidence in South Africa’s building sector fell in the first quarter of 2019, with the building confidence index sponsored and compiled by First National Bank and the Bureau for Economic Research (FNB/BER) losing seven points to an almost eight-year low of 25.

The current level of the index indicated that 75 percent of respondents were dissatisfied with prevailing business conditions, FNB and the BER said.

Building activity growth has been contracting for the past few quarters, so such a sharp decline – on top of that seen in previous quarters – was really detrimental for confidence,” FNB property economist Siphamandla Mkhwanazi said.

After staying above 40 during the second half of 2018, the confidence of manufacturers of building materials fell by 24 points to 19 in the first three months of this year, marking the single biggest decline in four years.

The only positive from this quarter’s survey results was an uptick in confidence among architects to 36, from 26 in Q4 2018.

“Overall, the building pipeline suggests that building activity growth will continue to be under pressure in the short to medium term,” Mkhwanazi said.

The FNB/BER building confidence index can vary between zero, indicating an extreme lack of confidence and 100, indicating extreme confidence.

It reveals the percentage of respondents that are satisfied with prevailing business conditions in ix sectors, namely architects, quantity surveyors, main contractors, sub-contractors (plumbers, electricians, carpenters and shop fitters), manufacturers of building materials (cement, bricks and glass) and retailers of building material and hardware.

It covers the whole pipeline from planning to the actual erection of buildings by main contractors and sub-contractors. The fieldwork for the first quarter survey was conducted between January 28 and March 4.

Source: African News Agency (ANA)

In addition:

A broad-based weakening in activity pushes confidence down to worrying lows

The RMB/BER Business Confidence Index (BCI) declined by a further three points to 28 in the first quarter of 2019. This is the lowest level since the 27 index points recorded in the second quarter of 2017, and before that, the deep recession of 2009.

Relative to the fourth quarter, sentiment deteriorated in four of the five sectors covered by the RMB/BER BCI. The nine-point declines in the building and retail trade sectors were the largest.

Building confidence dropped from 32 to 23, the lowest level in eight years. This fall

can primarily be attributed to an across-the-board dearth of new work.

After rallying from 23 to 33 in the fourth quarter, retail confidence reset to 24 in the

first quarter.

These readings are the lowest levels since the onset of the present business cycle downswing in December 2013. The low confidence stems mainly from the persistent underperformance of the largest component, non-durable goods (mainly food and beverages). Similar to 2018, the surprisingly strong performance of furniture sales remained the only bright spark.

Although wholesale confidence declined by a relatively modest four points from 44

to 40, this conceals a massive deterioration in sales.

After hovering around 34 in the first half of 2018, manufacturing confidence

slumped to 26 in the third quarter before recovering to 30 in the fourth quarter. It

relapsed to 25 in the first quarter, as an abrupt drop in export sales hit

manufacturers on top of a faster deterioration in domestic sales.

The new vehicle trade is the only sector that registered an improvement in

confidence. Following the drop from 37 to 15 in the fourth quarter, motor confidence

rebounded partially to a still low 26. Car sales remained dismal.

Bottom line

South Africa will not be able to shift to a lasting higher growth and prosperity path withoutmore short-term pain”, said Ettienne le Roux, chief economist at RMB. This time around, the country cannot rely on the global economy to counterbalance such internal adjustment costs as global growth itself is now shifting to a lower gear.

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