TOO SOON TO TELL IF UPTICK IN BUILDING CONFIDENCE WILL BE SUSTAINED

The First National Bank (FNB)/Bureau for Economic
Research (BER) Building Confidence
Index (BCI) rose by three points to 25 in the fourth quarter.

This was after the index receded to a 20-year-low
level of 22 in the third quarter.

The BER said in a report on Wednesday that four of
the six subsectors in the index had showed higher confidence levels; however,
that was almost entirely offset by a 35-index point drop in the confidence
of building material
manufacturers.

“The underlying indicators suggest a mild
improvement in activity, but off a low base. Looking ahead, activity growth
could come under pressure again given the relative scarcity of new demand,” it
stated.

The four subsectors that registered higher
confidence in the fourth quarter were hardware retailers, architects,
subcontractors and main contractors. The confidence of quantity surveyors was
unchanged at a level of 15.

The confidence of main contractors, in particular,
was underpinned by an uptick in building activity
in the residential sector. However, despite more activity and profitability for
main contractors, there were still concerns within the sector, such as
tendering competition.

FNB property economist Siphamandla Mkhwanazi said the rating of insufficient new
demand as a business constraint
remained elevated and suggested that it would be prudent not to read too much
into the increase in activity this quarter, as it may not be sustained.

Meanwhile, Mkhwanazi said that while confidence was
alarmingly low for building material
manufacturers at a level of four in the fourth quarter, it was not supported by
the underlying indicators.

“In fact, sales increased notably along with a
slight improvement in production. Additionally, confidence in this subsector
could be volatile from one quarter to another.”

He added that while it was clear that activity in
the building sector
had improved, from a low base, in the fourth quarter, it was too soon to tell
if this would be sustained.

“The high level of tendering price competition and the elevated rating of the lack of new building demand as a business constraint, suggest that work is still relatively scarce. This does not even take into account the poor state of the broader economy,” said Mkhwanazi. http://www.engineeringnews.co.za/article/too-soon-to-tell-if-uptick-in-building-confidence-will-be-sustained-2019-12-04