Confidence in the country’s building industry tumbled in the fourth quarter of 2008, according to a survey by First National Bank (FNB) released on Wednesday.
The FNB Building Conference Index fell to 40 points in the fourth quarter from 52 in the third quarter of 2008.
Business confidence of residential contractors remained stable at an index value of 34 during the fourth quarter of 2008.
”Nevertheless, a closer inspection of the survey revealed that business conditions remained rather depressed and unfavourable.”
According to FNB’s chief economist, Cees Bruggemans, the growth in building activity during the fourth quarter of 2008 remained very sluggish and turned out below the expectations of survey respondents.
The weak demand for residential buildings had resulted in a tight tendering environment.
”In order to compete, respondents to the survey had to reduce their profit margins with the result that the overall profitability of companies took a knock.”
Given the sluggish nature of building demand in the residential markets, respondents indicated they laid-off employees.
Turning to prospects for the first quarter of 2009, Bruggemans said survey respondents did not expect a further deterioration in overall business conditions.
FNB property strategist John Loos said the business confidence of non-residential building contractors declined from an index value of 66 in the third quarter, to 59 in the fourth quarter of the year.
”Survey respondents reported that business conditions turned out well below expectations.”
With clear signs of a weakening in demand for the construction of non-residential buildings and to stop downward pressure on profitability of their building companies, survey respondents retrenched labour during the survey quarter. They expected to continue doing so in the first quarter of 2009.
Loos said the broad consensus was that no further major deterioration in business conditions was expected at the start of next year.
The index is compiled quarterly from building, manufacturing, retail and wholesale opinion surveys undertaken by the Bureau for Economic Research at Stellenbosch University. It is sponsored by FNB. — Sapa