FNB's Building Confidence Index dropped in the fourth quarter of the year, the bank said on Monday.

The index decreased from a value of 32 in the third quarter of 2009 to 28 in the fourth quarter of 2009.

This followed a rise of two index points in the previous quarter, FNB said in a statement.

The index measures the business confidence of all the major role players and suppliers involved in the building industry including architects, quantity surveyors, contractors, sub-contractors and retail merchants as well as manufacturers of building materials.

In the fourth quarter of 2009, of the six sub-components of the index, four registered a decline, while rises were recorded in the remaining two components.

Relative to the situation in the third quarter of this year, the following declines in confidence levels took place, namely, architects (-12), quantity surveyors (-6), building contractors (-1) and manufacturers of building materials (-23).

Residential building cycle bottomed

Against this, improvements in business confidence of retailers of building materials (+9) and building sub-contractors (+6) were registered.

FNB chief economist Cees Bruggemans said a closer inspection of the fourth quarter indicated that the residential building cycle had bottomed, while building activity in the non-residential sector remained sluggish and was still moderately trending down at present.

"The drop in business confidence of manufacturers of building materials, after a notable improvement in the previous quarter, can possibly be explained by the fact that retailers that started restocking in the previous quarter, have now reached a more acceptable level of stocks in relation to expected demand."

He said they were ? in all probability ? waiting for building activity to start showing more sustainable growth before upping inventories further.

A marginal recovery

According to Bruggemans, following on the marginal recovery in the business confidence of residential contractors in the third quarter of this year, a further moderate strengthening of three index points to a level of 21 was registered in the fourth quarter of 2009.

He said although the growth in building activity underperformed expectations during the year's fourth quarter, it nevertheless showed an improvement on that done in the third quarter of 2009.

"It appears that the lower turning point in the residential building cycle has been reached and that a slow process of recovery is finally taking place."

Bruggemans said new residential building work in general still remained relatively scarce, giving rise to a keen tendering environment.

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