Released on Tuesday, the FNB Building Confidence Index increased to 52 in Q3 2008 from 50 in Q2 2008, but well below an index value of 85 during the same quarter last year.
The index is compiled quarterly from the building, manufacturing, retail and wholesale opinion surveys undertaken by the Bureau for Economic Research (BER) at Stellenbosch University. The BER business survey in the building industry was conducted between August 4 and September 1, 2008.
The FNB Building Confidence Index measures the business confidence of all the major role players and suppliers involved in the building industry such as architects, quantity surveyors, contractors, sub-contractors, wholesale and retail merchants, and manufacturers of building materials.
FNB Chief Economist Cees Bruggemans said that the marginal rise in the index was explained by a more than doubling in the confidence level of retailers of building materials and to a lesser extent by a 6 index point increase in the confidence of quantity surveyors and a 2 index point increase in the confidence of residential contractors.
"It would appear as if the rise in confidence of retailers is related to the successful discounting and selling of stocks, which increased involuntarily, in the previous quarter. This was probably a once-off event and confidence is likely to wane going forward," said Bruggemans.
The business confidence of residential contractors increased marginally from an index value of 32 in the second quarter 2008 to 34 in the third quarter of the year.
Bruggemans said building activity in this segment of the industry remained most unfavourable and no less than 87% of the respondents to the survey indicated that the insufficient demand for building work was a serious constraint affecting their businesses. Growth in building activity in the third quarter of the year, although rather weak, was in line with expectations.
"The weak demand for residential buildings resulted in an increase in tendering competition for new projects. In order to compete, respondents to the survey had to reduce their profit margins with the result that overall profitability took a knock," he said.
Bruggemans said that given the sluggishness of building demand in the residential market, respondents indicated that they further reduced the number of people in their employment, more so than expected at the time of the previous survey.
Looking ahead to the fourth quarter, Bruggemans indicated that the broad consensus was that business conditions were unlikely to deteriorate further.
In the non-residential sector, FNB Property Strategist John Loos stated that business confidence had declined from an index value of 70 in the second quarter to 66 in the third quarter of the year.
Loos said that business conditions turned out below expectations. Whereas a net 27% of respondents anticipated a moderation in the growth in building activity at the time of the previous survey, an analysis of third quarter results revealed that a net 43% eventually experienced weaker business conditions compared with the same quarter a year ago. The growth in building activity suffered accordingly.
Loos observed that in line with weaker demand levels, tendering competition intensified. As a result, the growth in the profitability of participants to the survey was adversely affected. – I-Net Bridge
Readers' Comments
Have a comment or question about this article? Email us now..
Property News
Click here for more property news articles.
Need a blog?
Start your own blog with a free blog from 24.com.
Print
