Struggling Building industry welcomes interest rate cut

The Reserve Bank has taken a more proactive approach in monetary policy, by not only changing the every second month MPC meetings to monthly, but also taking consideration of the economic crisis. The South African economy is in a recession whether the official statistics have been released or not, this is merely a formality. The Reserve Bank shrugged any concerns or warnings last year, that the economy is going to suffer because of relentless interest rate hikes, despite it having very little impact on easing inflationary pressures caused by factors out of the consumers control namely food and oil. Nonetheless, the Reserve Bank ahead of 22 April 2009 is now seemingly more considerate of the economic climate and cut the repo rate  by a further 100 basis points today to 9.5%. Financial institutions have subsequently dropped the lending rates to 13%.

Drop in building confidence comes as no surprise

According to the FNB Building confidence index which measures the business confidence of major role players and suppliers involved in the industry, confidence levels dropped from an index value of 40 in the 4^th quarter of 2008 to 28 in the 1^st quarter of 2009, down 30% over the last quarter. Compared to the 1^st quarter of 2008, the index plummeted by 57,6%. The slowdown in the number of square metres approved for new building construction predicted the anticipated more stringent working conditions, which means the drop in building confidence comes as no surprise. There has been negative growth in the total number of square metres approved since November 2007 and was 17% down in 2008 compared to 2007. Although growth has slowed substantially in non-residential buildings, hardest hit is the residential market, down 22,7% y/y in 2008.

Cement sales plummet 7,3% in February 2009