MEDIUM-TERM FORECASTING ASSOCIATES
Building Economists
Tel: (021) 881-3887
PO Box 7119
Fax: (021) 881-3887
STELLENBOSCH, 7599
E-mail: mfa@iafrica.com
BER Survey Results 2013Q2
Dr Johan Snyman
Medium-Term Forecasting Associates
STELLENBOSCH
21 June 2013
Summary
Banks, Building, Architects and Quantity Surveyors
The BER business survey for the second quarter of 2013 (with
prospects for the third quarter of 2013) have been released:
“The 2013Q2 survey results suggest that the recovery in the
building sector is gaining momentum. Moreover, the rise in
confidence across the different phases of the building sector
indicates that the recovery is becoming more broad-based and
therefore likely to be more sustained”.
Our MFA analysis indicates that there is a close correspondence
between the perceptions of roleplayers in the building industry, as
captured by the BER, and investment data, as compiled by the SA
Reserve Bank. The great benefit of “soft” business survey data is
that it is more recent than “hard” SARB investment data. The
SARB data pertain to 2013Q1, whereas the BER survey data reflect
the perceptions of business people during 2013Q2.
The results of the BER business survey amongst retail banks show that
banks applied stricter lending criteria during the latter part of 2012 when
great uncertainty prevailed in the South African economy. The latest 2013Q2
results indicate a return to normality. The current reading of 70 is just above
the long term average of 66. This finding is positive for the housing market
because mortgage loans could become more freely available.
BANKS' LENDING CRITERIA for HOUSEHOLDS
Percentage of respondents
VERY EASY < EASIER < > STRICTER > VERY STRICT
100
National Credit Act
Introduced
VERY
STRICT
90
80
STRICT
70
Global
Financial
Crisis
Average 66
60
NORMAL
50
40
EASY
EASY
30
|
02
|
03
|
04
|
05
|
06
|
07
|
08
|
09
|
10
|
Source: BER; Ernst & Young; MFA DATABASE (Economic upswings shaded)
11
|
12
|
13
|
The MFA CLIBI moved sideways for six quarters, but rose in 2011Q4 to an
index level of 33. In 2012Q1 it rose further to 37. During the second and
third quarters of 2012 the index dropped marginally to 35. In the fourth
quarter of 2012 it rose to 40. It rose to 43 during 2013Q2. This improvement
could presage a continued recovery in real building activity levels in coming
quarters.
MFA COMPOSITE LEADING INDICATOR (CLIBI)
FOR THE SOUTH AFRICAN BUILDING INDUSTRY
100
Shaded areas represent the upswing phases
of the business cycle
90
OPTIMISM
PESSIMISM < 50 > OPTIMISM
80
70
60
50
40
30
20
10
PESSIMISM
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
Source: FNB / BER; SARB; MFA DATABASE
|
01
|
04
|
07
|
10
|
13
This comparison between “soft” BER data and “hard” SARB data of real
investment in total buildings shows that building investment is growing
modestly (1% to 3% y-o-y). Phrased differently, overall building demand
is gradually recovering from a severe slump
MFA LEADING INDICATOR COMPARED TO
ANNUAL PERCENTAGE CHANGE in TOTAL INVESTMENT IN BUILDINGS
30
100
20
80
15
70
10
60
5
50
0
40
-5
30
-10
20
-15
10
-20
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
|
01
|
04
Source: FNB / BER; SARB; MFA DATABASE
SARB ANNUAL PERCENTAGE CHANGE
MFA LEADING INDICATOR
|
07
|
10
|
13
OPTIMISM
90
< 50 >
SARB ANNUAL PERCENTAGE CHANGE
25
MFA CLIBI
RIGHT-HAND
SCALE
PESSIMISM
ANNUAL % CHANGE
LEFT-HAND SCALE
The improvement in the BER business confidence levels of residential
building contractors suggests that levels in real investment in residential
buildings (SARB data) could improve further in coming quarters. Note that
both indicators are in positive territory for the first time in 5 years
COMPARISON: ANNUAL PERCENTAGE CHANGE in INVESTMENT IN RESIDENTIAL BUILDINGS &
BUSINESS MOOD RESIDENTIAL BUILDING CONTRACTORS
40
100
90
30
70
10
60
0
50
40
-10
30
-20
20
-30
10
-40
0
|
72
|
77
|
82
|
87
|
92
|
97
|
02
|
07
|
Source: BER, SARB; MFA DATABASE
APC INVESTMENT in RESIDENTIAL BUILDINGS
BUSINESS MOOD RESIDENTIAL CONTRACTORS
12
PESSIMISM < 50 > OPTIMISM
ANNUAL PERCENTAGE CHANGE
INVESTMENT
80
20
Note that the leading indicator of the BER business mood amongst
non-residential builders is in positive territory for the first time in 5
years. SARB investment data in non-residential buildings are also
barely positive, reflecting modest growth
COMPARISON: ANNUAL PERCENTAGE CHANGE in INVESMENT IN NON-RESIDENTIAL BUILDINGS
& BUSINESS MOOD NON-RES BUILDING CONTRACTORS
30
100
90
20
70
10
60
0
50
40
-10
30
20
-20
10
-30
0
|
72
|
77
|
82
|
87
|
92
|
97
|
02
Source: BER; SARB; MFA DATABASE
INVESTMENT NON-RES
BUSMOOD NON-RES CONTRACTORS
|
07
|
12
PESSIMISM < 50 > OPTIMISM
ANNUAL PERCENTAGE CHANGE
80
When compared to the overall economy (manufacturing, wholesale, retail,
and vehicle sales surveyed by the BER), the business mood of building
industry respondents reached a deeper level of pessimism during the recent
downturn. However, both these key indicators are now presaging growth in
coming quarters
BUSINESS CYCLE & BUILDING INDUSTRY
BUSINESS MOOD
100
OPTIMISM
90
PESSIMISM < 50 > OPTIMISM
80
70
60
50
40
30
20
10
PESSIMISM
0
|
62
|
67
|
72
|
77
|
82
|
87
|
92
|
97
Source: RMB / BER; SARB; MFA DATABASE
OVERALL ECONOMY
BUILDING INDUSTRY
|
02
|
07
|
12
Black and white consumers are bucking the trend with key indicators
declining. Could it be that consumers are disillusioned with economic
and political developments as they unfold in South Africa?
CONSUMER CONFIDENCE: NATION BUILDING
BLACK & WHITE CONSUMERS
150
DEMOCRATIC
ELECTIONS
GOLD
BOOM
140
PESSIMISM < 100 > OPTIMISM
130
SOCCER
WORLD
CUP BID
PETROL
PRICE
HIKES
& JOB
LOSSES
120
110
100
90
80
70
60
ASIAN
CRISIS
RUBICON
50
|
77
|
82
|
87
GLOBAL
FINANCIAL
CRISIS
|
92
|
97
|
02
Source: FNB / BER; MFA DATABASE
WHITE
BLACK (BUSINESS CYCLE UPSWINGS SHADED)
|
07
|
12
The business mood indicators of architects, quantity surveyors and
building contractors are showing further improvement
ARCHITECTS, QUANTITY SURVEYORS & BUILDING CONTRACTORS
BUSINESS MOOD
100
OPTIMISM
90
PESSIMISM < 50 > OPTIMISM
80
70
60
50
40
30
20
10
PESSIMISM
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
|
01
Source: FNB / BER; MFA DATABASE (Economic Upswings Shaded)
Contractors
Architects
Quantity Surveyors
|
04
|
07
|
10
|
13
Both indicators have crossed into positive territory for the first time in
5 years
COMPARISON RESIDENTIAL & NON-RESIDENTIAL CONTRACTORS
BUSINESS MOOD
100
OPTIMISM
90
PESSIMISM > 50 < OPTIMISM
80
70
60
50
40
30
20
10
PESSIMISM
0
| 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 20 | 01 | 02 | 03 | 04 | 05 | 06 | 07 | 08 | 09 | 10 | 11 | 12 | 13 |
Source: FNB / BER; SARB; MFA DATABASE
RES CONTRACTORS
NON-RES CONTRACTORS
Labour and materials bottlenecks eased during the recession. Materials
shortages are developing. Skilled labour shortages remain the bane of
the industry
LABOUR & MATERIALS SHORTAGES
100
LESS SEVERE BOTTLENECKS / SEVERE BOTTLENECKS
90
80
70
60
50
40
30
20
10
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
|
01
|
Source: FNB / BER; SARB; MFA DATABASE (Economic Upswings Shaded)
Materials
Labour
04
|
07
|
10
|
13
Competition in tendering is still fairly keen, but the trend in this indicator
is downward, implying an easing in the degree of competition. Hence,
tender prices rose rapidly ( 11% y-o-y ) in 2013Q2. Only the survivors who
remain in the game, are currently tendering
BUILDING CONTRACTORS: THE DEGREE OF COMPETITION IN
TENDERING
100
LESS KEEN < 50% > VERY KEEN
90
80
70
60
50
40
30
20
10
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
|
01
Source: FNB / BER; MFA DATABASE (Economic Upswings Shaded)
|
04
|
07
|
10
|
13
The average number of tenderers on the tender list has fallen quite suddenly
as happened in 1974, 1978 and 1986. This reflects less intense competition in
tendering with the indicator having fallen from 10 in 2010, to 6 during 2013Q2
AVERAGE NUMBER OF TENDERS RECEIVED PER BUILDING PROJECT
12
THE SHADED AREAS REPRESENT
THE UPSWING PHASES OF THE
BUSINESS CYCLE
NUMBER OF TENDERS PER PROJECT
10
BUILDING
BOOM
8
6
TREND
BREAK
4
2
ONLY 3 TENDERERS
ON AVERAGE in 2007
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
|
01
Source: BER; MFA DATABASE (Economic Upswings Shaded)
|
04
|
07
|
10
|
13
Despite our earlier expectation in 2013Q1, builders’ merchants currently
view their stock levels as “ above average” in 2013Q2 with a reading of 70.
This could lead them to reduce stock levels.
BUILDERS' MERCHANTS STOCK LEVELS
IN RELATION TO EXPECTED DEMAND
100
Destocking
90
STOCKING UP < 50 > DESTOCKING
80
70
60
50
40
30
20
AVERAGE is 66
Stocking up
10
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
|
01
|
Source: FNB / BER; MFA DATABASE (Economic Upswings Shaded)
04
|
07
|
10
|
13
On balance, general business conditions in the Western Cape seem to
be improving, with main contractors now in the positive zone. Subcontractors seem to lag
WESTERN CAPE: BUILDING CONTRACTORS & SUB-CONTRACTORS
BUSINESS MOOD
100
90
PESSIMISM < 50 > OPTIMISM
80
70
60
50
40
30
20
10
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
|
01
Source: FNB / BER; MFA DATABASE (Economic Upswings Shaded)
CONTRACTORS
SUB-CONTRACTORS
|
04
|
07
|
10
|
13
Confidence is returning to main and sub-contractors in the Eastern
Cape
EASTERN CAPE: BUILDING CONTRACTORS & SUB-CONTRACTORS
BUSINESS MOOD
100
90
PESSIMISM < 50 > OPTIMISM
80
70
60
50
40
30
20
10
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
|
01
Source: FNB / BER; MFA DATABASE (Economic Upswings Shaded)
CONTRACTORS
SUB-CONTRACTORS
|
04
|
07
|
10
|
13
The business mood of main contractors and sub-contractors in KZN is
showing some improvement from very low levels recorded in 2010
KWAZULU-NATAL: BUILDING CONTRACTORS & SUB-CONTRACTORS
BUSINESS MOOD
100
90
PESSIMISM < 50 > OPTIMISM
80
70
60
50
40
30
20
10
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
|
01
Source: FNB / BER; MFA DATABASE (Economic Upswings Shaded)
CONTRACTORS
SUB-CONTRACTORS
|
04
|
07
|
10
|
13
The business mood of main contractors and sub-contractors in
Gauteng is showing further improvement
GAUTENG: BUILDING CONTRACTORS & SUB-CONTRACTORS
BUSINESS MOOD
100
90
PESSIMISM < 50 > OPTIMISM
80
70
60
50
40
30
20
10
0
|
71
|
74
|
77
|
80
|
83
|
86
|
89
|
92
|
95
|
98
|
01
Source: FNB / BER; MFA DATABASE (Economic Upswings Shaded)
CONTRACTORS
SUB-CONTRACTORS
|
04
|
07
|
10
|
13
The business mood of civil engineering contractors rose from 36 to
51 in 2013Q1, becoming positive for the first time in four years
CIVIL ENGINEERING CONTRACTORS
BUSINESS CONFIDENCE
100
90
THE SHADED AREAS REPRESENT
THE UPSWING PHASE OF THE
BUSINESS CYCLE
OPTIMISM
PESSIMISM < 50 > OPTIMISM
80
70
60
50
40
30
20
10
PESSIMISM
ESKOM
ROADS
TRANSNET
GAUTRAIN
SOCCER CUP
MEGA - PROJECTS
0
| 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 00 | 01 | 02 | 03 | 04 | 05 | 06 | 07 | 08 | 09 | 10 | 11 | 12 | 13 |
Source: SAFCEC; FNB / BER; SARB; MFA DATABASE
Both the qualitative (survey) and quantitative SARB investment data
are barely positive
COMPARISON: BUSINESS CONFIDENCE CIVIL ENGINEERING CONTRACTORS &
CONSTRUCTION WORKS ANNUAL PERCENTAGE CHANGE (SMOOTHED)
50
100
OPTIMISM
90
30
80
20
70
10
60
0
50
-10
40
-20
30
-30
20
PESSIMISM
-40
-50
10
0
| 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 00 | 01 | 02 | 03 | 04 | 05 | 06 | 07 | 08 | 09 | 10 | 11 | 12 | 13 |
Source: BER; SAFCEC; SARB; MFA DATABASE
C W APC Smoothed
BUS CONFIDENCE CIVIL CONTRACTORS
BUSIESS CONFIDENCE CIVIL
CONTRACTORS
CW ANNUAL PERCENTAGE CHANGE
40
Thank you for your aTTenTion …
Johan Snyman
mfa@iafrica.com