According to FNB, the index had largely been stable; however, it has now declined to a lower level, with more than 70% of respondents being dissatisfied with the current state of affairs.
The FNB/BER, building confidence index, measures confidence levels ranging from 0 to 100, with higher values indicating greater confidence.
The index assesses satisfaction with current business conditions in six sectors: architects, quantity surveyors, main contractors, sub-contractors (including plumbers, electricians, carpenters, and shop fitters), manufacturers of building materials (such as cement, bricks, and glass), and retailers of building material and hardware.
Siphamandla Mkhwanazi, a senior economist at FNB, said that one of the primary factors supporting a previous rise in business activity was the resurgence in building work in the Western Cape.
“This is starting to wane in the face of the higher interest rate environment and possibly also an easing in the pace of semigration, among other things,” said Mkhwanazi.
“Overall, while we are still convinced that the building sector bottomed sometime in the middle of last year, the momentum eased in 2Q2023. This is most evident given the moderation in activity growth among main contractors, especially those operating in the Western Cape.”
FNB reported that business activity growth eased sharply in the second quarter, and prospects for building work over the next few quarters also turned negative.
Data points to the two forward-looking indicators showing a significant decline.
The first indicator is the respondents’ expectations for future activities in the next quarter. The second indicator is the rating of the lack of new demand, which serves as a measure of order books. Both indicators worsened considerably during this period.
“In sum, the results of this quarter’s survey suggest that the robust momentum in main contractor activity seen in the recent past was short-lived,” said the senior economist.
FNB reported that regarding the sub-sectors analysed, the following changes to confidence were recorded compared to 1Q2023:
- Building material manufacturers: 13 (+7)
- Quantity surveyors: 26 (-3)
- Architects: 23 (-3)
- Hardware retailers: 22 (-13)
- Building sub-contractors: 40 (-17)
- Main contractors saw no change
Business activity for sub-contractors did remain elevated in light of new rok relating to alternative energy sources; however, there is an expectation that work will not be as abundant in the coming third quarter – which weighed on sub-contractors confidence, said Mkhwanazi
Architect activity showed a marked improvement this quarter. “Even so, confidence was lower at 23 from 26 in 1Q2023. Similarly, the business confidence of quantity surveyors was lower at 26 (from 29 in 1Q2023) despite a mild uptick in activity,” FNB said.
For hardware retailers, sales volumes under immense pressure have weighed heavily on profitability. The future outlook for sales is also looking bleak. This, in turn, has added to lower confidence among hardware retailers.
The confidence of building material manufacturers increased to a still-low 13, from 6 in 1Q2023, added FNB.
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