Johannesburg - The FNB/BER building confidence index fell 11 points to 41 in the second quarter of 2014, with confidence in all the index's sub-sectors lower, First National Bank said on Tuesday.
“After breaching the key 50-index point mark in the first quarter of 2014, the FNB/BER building confidence index fell by 11
points to 41 in the second quarter of 2014,” FNB economist John Loos said in a statement.
“The current level indicates that about 60 percent of respondents are dissatisfied with prevailing business conditions.”
The results also suggested the recovery in the building sector, just as it was gaining momentum, had been nipped in the bud.
The 11 point drop was largely due to a sharp fall in the confidence of building material manufacturers, who saw weaker domestic demand.
While exports remained buoyant, it was not enough to boost confidence because export volumes compared to the domestic market were small.
Loos said the slowdown in domestic demand could also partly be due to the prolonged labour unrest in the platinum sector.
“The weakness in the domestic building sector is further reflected in the activity of main contractors,” Loos said.
“Building activity for both residential and non-residential main contractors declined during the quarter.”
As a result, the confidence of main contractors edged lower to 45 index points in the second quarter, from 49 in the first quarter of the year.
“While a further decline in residential building activity was expected, the slowdown in non-residential activity, which up until now helped lift the sector, was surprising,” he said.
“This will certainly weigh on the outlook going forward.”
Despite the fall in activity, overall profitability improved, possibly due to firms increasing their margins, especially in the residential sector.
However, given the continued weakness in building demand this may not be sustainable, he said.