South African Building Confidence Index at historically low level

The FNB/BER Building Confidence Index dropped one point to register a level of 33 in the fourth quarter of 2022.

The FNB/BER building confidence index measures the percentage of respondents that are satisfied with prevailing business conditions in six sectors:

• Architects
• Quantity surveyors
• Main contractors
• Sub-contractors – plumbers, electricians, carpenters, and shop fitters
• Manufacturers of building materials – cement, bricks, and glass
• Retailers of building materials and hardware

The index can vary between zero, indicating an extreme lack of confidence, and 100, indicating extreme confidence.

The latest score of 33 means the index has been at a historically low level for much of the year.

While the composite confidence index is largely unchanged, building activity, particularly among residential main contractors, improved markedly.

“After declining for the most part of the last few years, it seems as if building activity has finally stabilised,” said Siphamandla Mkhwanazi, senior economist at FNB.

This does not mean that an expansion in building activity is on the cards for the fourth quarter, but rather that the decline should be less pronounced than in previous quarters.

While activity among main contractors improved, architects revealed that the amount of work available slowed further in the fourth quarter.

This is unexpected, given the consistent improvement in the building pipeline reported by respondents for much of the year.

“The mixed building survey results from this quarter highlight how uncertain prospects remain in the sector. It is prudent to remain cautious about the outlook for 2023,” said Mkhwanazi.

“The residential building sector seems to be resilient despite headwinds. That said, the momentum in activity is disproportionately clustered in the Western Cape,” he said.

“It is unlikely that this alone will be enough to support the sector going forward,” he said.

FNB/BER Composite Building Confidence Index