After remaining essentially unchanged over the past year, the FNB/BER Building Confidence Index declined in the second quarter, reflecting pessimism in prevailing business conditions.
The gauge, which measures sentiment in six sectors, shed five points to register a level of 28 in the second quarter, from 33 previously, reaching its lowest level since late 2020.
FNB senior economist Siphamandla Mkhwanazi said the current level of the index means that more than 70% of respondents are dissatisfied with prevailing business conditions.
The index is measured on a scale of zero to 100, with zero indicating an extreme lack of confidence and 100, indicating extreme confidence. The sectors covered are architects, quantity surveyors, main contractors, subcontractors, manufacturers of building materials, and retailers of building material and hardware.
The gauge covers the entire construction pipeline, from planning represented by the architects and quantity surveyors; renovations; additions; owner builders; the informal sector represented by building material and hardware retailers; and production, which includes the manufacturers of building materials, to the actual erection of buildings by main contractors and subcontractors.
Mkhwanazi said a decline in main contractor activity as well as continued weaker hardware retailer sales underpinned the lower sentiment.
“Of additional concern is the broad-based expectation that activity and sales will likely come under further pressure over the short term,” he said.
In contrast, activity at the start of the building pipeline improved, he said. Sub-contractor activity also remained robust amid the private sector’s push for energy independence, he added.
Survey data shows that prospects for building work over the next few quarters also turned negative and that both forward-looking indices — respondents’ expectations for activity next quarter and the rating of the lack of new demand as a business constraint — worsened significantly in the quarter.
After slipping to 35 points in the first quarter, sentiment among hardware retailers fell further to 22 in the second quarter, reaching the lowest confidence level since the second quarter of 2020.
Mkhwanazi said retail sales volumes remained under significant pressure, which weighed heavily on profitability.
“Moreover, the outlook for sales is downbeat with the index measuring sales orders also weakening significantly. All of these factors considered, it’s no wonder their confidence declined,” he said.
While architect activity showed a marked improvement this quarter, confidence remained low was at 23, from 26 previously. Similarly, the business confidence of quantity surveyors fell to 26 from 29.
While activity among main contractors receded in the review period, activity among subcontractors remained well supported. Despite this, sentiment declined to 40 points from 57 in the first quarter.
However, the confidence level among building material manufacturers increased to 13 from 6 points.
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