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Cement sales growing again, but still no light at the end of the tunnel

24-11-2011

Despite sales of cement showing growth again, for the building industry there is still no light at the end of the tunnel.

As the accompanying graph shows, after having shrunk on a year-on-year basis since 2008, cement sales have since the latter half of 2011 been able to show growth. In October 2011, cement sales grew by an impressive yearly rate of 10%.
 

 

To most at the coalface, however, building activity remains lacklustre. This is so because the majority of residential and nonresidential building contractors are still reporting that to them, building activity is down.

In one of their surveys, the Bureau for Economic Research (BER) asked a panel of residential and non-residential contractors to rate if building activity is “up”, “the same” or “down” when compared to a year ago. The percentage reporting “down” is then subtracted from the percentage of respondents saying “up” to arrive at a net percentage balance. As can been seen in the graph, this metric of non-residential and residential building activity has been negative since the start of 2008 (see corresponding graph).
 

 

As a proxy for building-construction activity, the growth in cement sales does provide a ray of hope for the battered building industry. But this growth is still from a low base. As observed thus far from other domestic economic indicators, once the base effects have worn out, a moderation in growth will most likely be seen. Besides, building plans passed — a harbinger of future building activity —continue to shrink for most property types. The exceptions are the affordable and high-density housing alternatives, where some developers seem to have found niche markets.

For more information, please contact John Lottering on 021 946 2480 or visit www.rode.co.za.