Rising FNB/BER building confidence index in 4Q2010
By Cees Bruggemans, Chief Economist of FNB.
Building contractors continued to face difficult conditions during 4Q2010. However, the increase in the FNB/BER building confidence index signals early stirrings in parts of the building industry, with a possible broader recovery in building activity from later in 2011 onwards.
The FNB/BER building confidence index increased from 29 during the 3Q2010 to 38 during the 4Q2010. The index could 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, building contractors, building sub-contractors, manufacturers of building material (cement, bricks and glass) and retailers of building material and hardware.
This differs from the RMB/BER business confidence index which surveys many types of businesses in various sectors, and in the case of the building industry only incorporates building contractors.
In contrast, the FNB/BER building confidence index covers the whole building industry pipeline, from planning (represented by the architects and quantity surveyors), renovation (retail trade of building material) and production (manufacturing of building material) to the actual construction of buildings.
The 4Q2010 figure of 38 is the highest in two years. Bar the second quarter of 2010 (when the index reached a low point of 24), the FNB/BER building confidence index remained almost unchanged at 30 since the beginning of last year.
The rise in the FNB/BER building confidence index can be attributed to a recovery in the confidence of the sectors at the beginning of the pipeline, namely planning and renovation. In contrast, the confidence of the sectors at the end of the pipeline, namely building contractors and sub-contractors, remained unchanged at a low level.
In conclusion: The rise in the FNB/BER building confidence index is encouraging as it provides the first indication that building activity could begin to recover later in 2011. The recovery in the building sector usually starts on the residential side, followed by the non-residential side about a year later.
Should the building sector start to recover from later in 2011 onwards, it will have lagged the overall economic recovery by about the same length in time as in the previous cycle. In the last recovery, the economy began picking up in 1999, but the building sector only followed in 2002.
Cees Bruggemans, Chief Economist FNB Cees@fnb.co.za
FNB Composite Building Confidence Index
Source: BER, Stellenbosch
Source: Cees Bruggemans, FNB, November 29, 2010.
More on this topic (What's this?)
Rising FNB/BER building confidence index in 4Q2010 (Wall Street Sector Selector, 11/30/10)
Militarization of the Economy; Retired Generals " Advise " the Pentagon as Paid Consultants of ... (Phil's Favorites, 12/27/10)
Citi Cuts Target On Defense Contractors (LMT) (Benzinga, 10/25/10)
Performance Optimization WordPress Plugins by W3 EDGE