Building Confidence Index sinks to an all-time low
CAPE TOWN – The FNB/BER Building Confidence Index fell to an all-time low of 4 in the second quarter from an already depressed 13 in the first as a result of coronavirus (Covid-19) lockdown April and May.
Data from FNB/BER Building Confidence Index showed that hardware retailers, sub-contractors and main contractors registered the lowest sentiment during the quarter with the sub-contractor index falling to zero. It said architects, quantity surveyors and building material manufacturers remained unchanged at very low levels.
FNB/BER said building activity fell to its lowest on record compared to the same quarter last year.
“With the vast majority of building contractors unable to work during April and May, it is unsurprising that activity tanked,” said Siphamandla Mkhwanazi, FNB's senior economist. FNB/BER the index showed that activity was likely to contract again in the third quarter.
It said order books were expected to come under pressure, as indicated by an increase in the rating of insufficient new demand as a business constraint.
“While a sharp fall in activity was expected in the second quarter, the results raise an additional concern relating to the pace of recovery and the magnitude of activity in the third quarter,” said Mkhwanazi.
“Cancelled work and postponed tenders, as client firms go under or more aggressively manage cash flow, all argue for a prolonged period of depressed building activity growth. This means that the impact of the Covid-19-related shutdown will linger in this sector for some time. A quick recovery is most unlikely,” said Mkhwanazi.
The confidence of architects and quantity surveyors was unchanged at 12 and 4, respectively. Activity remained very weak, although broadly in line with the first quarter.
“This confirms the downbeat outlook for the building sector. The fact that activity didn’t deteriorate meaningfully - in fact, architect activity improved slightly - was largely as a result of different work arrangements in the case of architects and quantity surveyors who are able to work off site and from home. It also highlights just how unpromising the building pipeline already was in the first quarter”, said Mkhwanazi.
Hardware retailers registered the biggest fall in confidence, from 24 to 3. As expected from the lockdown, sales volumes fell dramatically in the quarter.
“The outlook for hardware retailers is bleak. Not only are they affected by slowing building demand, but falling consumer income is set to weigh heavily on this sector, at least for the remainder of this year,” said Mkhwanazi.