However, despite the uptick in confidence, the building sector recovery remains sluggish, with close to 7 out of 10 respondents in different sectors of the building industry rating prevailing business conditions as unsatisfactory.
Compared to 3Q 2012, the following changes in confidence levels took place, namely, retailers of building materials (+34), sub-contractors (+13), main contractors (+2), architects (-1), manufacturers of building materials (-6) and quantity surveyors (-10).
Confidence among main contractors rose by 2 points to 28 during 4Q 2012. Of the two sub-sectors, residential business confidence showed the biggest improvement (reaching a four year high), while confidence of non-residential main contractors remained stable.
Even so, the non-residential sector has continued to outperform the residential sector. In terms of activity levels, non-residential main contractors are still faring slightly better than their residential counterparts are, albeit worse than expected. The sluggish pace of the recovery continues to disappoint especially non-residential contractors, keeping their business confidence low.
Sub-contractor confidence increased notably, from 29 to 42 index points, a level last reached in early 2009. There is a distinct difference between the performance of the residential and non-residential sub-contracting sectors. Although both are improving, the recovery in activity among non-residential sub-contractors is much more pronounced. This is consistent with the recovery in main contractor activity, which started a few quarters ago and has now filtered down to sub-contractor level.
Despite the mild improvement in the activity of main contractors and the somewhat faster improvement in sub-contractors activity, prospects for future work remain poor. Confidence among architects lost one point to 29, while confidence of quantity surveyors fell to 33 index points from 43 during 3Q 2012. In both cases, activity levels continued to disappoint.
Building material manufacturer confidence slowed for the third consecutive quarter, from 17 to 11 index points.
After rising marginally from 11 to 13 index points during 3Q 2012, business confidence of building material and hardware retailers rose from 13 index points to 47 during 4Q 2012. This large increase is partly due to a seasonal effect, with fourth quarter confidence typically much higher than that of the third quarter. This time around, the rise in confidence is not supported by an improved realised performance, but rather by the expectation that next quarter will be much better.
The building recovery gained some steam during 4Q 2012 as confidence rose. However, if you strip out the effect (mainly seasonal) of the sharp rise in confidence among retail merchants, then overall confidence remained largely flat as suggested by the trend observable in the composite confidence graph below. This suggests that the recovery is still fragile, likely moving sideways as opposed to upwards.
In addition, the building pipeline (as indicated by activity among architects and quantity surveyors) remains weak, marring the outlook for the building sector.
The FNB/BER building confidence index can vary between zero (indicating an extreme lack of confidence) and 100 (indicating extreme confidence). It reveals the percentage of respondents that are satisfied with prevailing business conditions in six sectors, namely architects, quantity surveyors, main contractors, sub-contractors (plumbers, electricians, carpenters and shop fitters), manufacturers of building materials (cement, bricks and glass) and retailers of building material and hardware.
In contrast to the RMB/BER BCI, which includes only main contractors, this index covers the whole pipeline, from planning (represented by the architects and quantity surveyors), renovations, additions, owner builders, the informal sector (represented by building material and hardware retailers) and production (manufacturers of building materials) to the actual erection of buildings by main contractors and sub-contractors.
Source: BER, Stellenbosch
