Building Confidence Index dips sharply

2008-04-15 00:00

The latest FNB Building Confidence Index level declined relatively sharply from 86 in the fourth quarter of 2007 to 66 in the first quarter of 2008.

The index — compiled from surveys undertaken by the Bureau for Economic Research (BER) — measures the business confidence of major role players such as architects, quantity surveyors, contractors, sub-contractors, wholesale and retail merchants and manufacturers of building materials.

The most notable quarter-on-quarter declines were:

o retailers of building materials (from 100 to 48);

o manufacturers (from 92 to 54);

o wholesalers (from 79 to 52) and

o building contractors (from 83 to 68).

The business confidence of residential building contractors dropped from 76 to 60.

First National Bank chief economist Cees Bruggemans said first-quarter growth in building activity in this sector of the building industry disappointed.

For example, whereas a net 21% of respondents expected a weakening in the first quarter of 2008, the latest survey results in the sector revealed that a net 39% experienced a decline in workloads.

The tightening in demand conditions and increasing tendering competition in the residential sector continues to exert downward pressure on profit margins.

With the demand for residential buildings waning, the reduction in workloads forced respondents to further reduce the number of people employed.

Bruggemans said the survey indicates that business conditions are likely to remain unfavourable in the residential sector of the building industry.

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