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FNB/BER building confidence lifts in 2011

The composite building confidence has lifted in the fourth quarter 2011 after holding steady in the preceding period, according to First National Bank and the Bureau for Economic Research (FNB/BER).

The latest FNB/BER building confidence index increased to 29 points from 23 points, boosted by retailers and manufacturers of building materials.

The rebound in the volume of sales - in the case of retailers - came after poor sales in the previous two quarters. "The higher sales can be attributed to the need to do maintenance and renovations of existing buildings after a long delay," said FNB chief economist, Cees Bruggemans. The surviving retailers also benefited from the fact that some of their competitors went out of business over the last year or so.

At 49 points, the confidence of building material merchants/retailers was just below the 53 points registered a year ago.

The building material manufacturers experienced the highest rate of increase in the volume of sales since the recession in 2008, according to the survey.

Their ability to raise selling prices to make up for higher cost outlays remained limited. As a result, profit growth and confidence remained low.

Whereas the confidence of residential contractors increased from 20 points to 22 points, that of non-residential contractors declined from 21 points to 14 points.

Bruggemans said this had come as a bit of a surprise as in recent times the non-residential sector had outperformed the residential sector.

"A single data point, however, does not indicate a reversal of the earlier trend.
"The 4Q2011 development may be due to a unique combination of factors, such as the simultaneous completion of a number of projects before new ones started.
"We need to see in early 2012 whether the earlier trend has changed, if at all," he said.
Tendering competition in the residential sector eased, but remained unchanged at a fierce level in the case of the non-residential sector.

Bruggemans said the rise in the building confidence index provided more evidence that the building sector was slowly beginning to recover.


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