The FNB Building Confidence Index — released on Tuesday — showed that confidence in the industry declined from a level of 66 in the first quarter of 2008 to 50 in the second quarter of 2008.
The business confidence of residential building contractors decreased sharply from an index value of 60 in the first quarter of 2008 to 32 in the second quarter of the year.
According to FNB chief economist Cees Bruggemans, second-quarter growth in building activity in this sector of the building industry ”has hit a brick wall” and was well below expectations.
Bruggemans said that possible reasons for the sharply weaker demand for residential building were, among others, rising interest rates and building costs, tightening of credit standards by banks, the impact of the introduction of the National Credit Act in 2007, a deterioration in consumer confidence and rising food and fuel price inflation that was eroding the buying power of consumers.
In view of the sharp deterioration in the tempo of residential building activity, ”job-shedding” had taken place, Bruggemans said.
”Indeed, a net 44% of the respondents to the survey reported that the number of people employed was below that of a year ago.
Bruggemans said that business conditions were likely to remain unfavourable in the third quarter of 2008, but no major further deterioration was expected by the respondents.
FNB property strategist John Loos observed that the business confidence of non-residential building contractors moderated further from an index value of 78 in the first quarter of 2008 to 70 in the second quarter. In the fourth quarter of 2007 the index stood at 92.
The index measures the business confidence of all the major role-players and suppliers in the building industry such as architects, quantity surveyors, contractors, sub-contractors, wholesale and retail merchants and manufacturers of building materials. – Sapa