QTPA Member Alert | AiG/HIA AUSTRALIAN PERFORMANCE OF CONSTRUCTION INDEX (SEPTEMBER 2012) (8/10/12)
AiG/HIA AUSTRALIAN PERFORMANCE OF CONSTRUCTION INDEX (SEPTEMBER 2012)
SLUMP IN NATIONAL CONSTRUCTION CONTINUES IN SEPTEMBER WITH 28 MONTHS OF DECLINE –WHAT ELSE CAN BE SAID.
KEY FINDINGS
■ The national construction industry fell further into negative territory in September, contracting at the sharpest rate in the past year. Steeper declines in activity, employment and deliveries from suppliers highlighted the ongoing deterioration in business conditions across the industry.
■ The Australian Industry Group Performance of Construction Index (Australian PCI®) in conjunction with the Housing Industry Association declined by 1.3 points to 30.9 in September. The index has now remained below the critical 50 point level separating expansion from contraction for 28 consecutive months.
■ Reflecting the dampening influence of falling new orders, all major subsectors recorded contractions in activity in September. Apartment construction remained the weakest performing sector (despite a slower pace of decline in activity) whilst house building, commercial and engineering construction all contracted at steeper rates during the month.
■ Respondents largely attributed the weak state of the industry to subdued demand conditions and the undermining influences of project delays low consumer confidence and tight credit conditions. Many businesses also cited a decrease in public sector spending on infrastructure projects and strong import competition as factors weighing heavily on activity.
CONSTRUCTION ACTIVITY AND CAPACITY
■ In seasonally adjusted terms, the activity sub-index registered 30.4 in September which was 0.8 points below the level of the previous month, indicating a sharper rate of contraction in total industry activity.
■ Subdued demand conditions drove declines in activity on a broad industry front.
■ Construction capacity utilisation remained at a weak level, despite rising slightly from a rate of 63.0% in August to 63.8% in September.
ACTIVITY BY SECTOR
■ House building activity continued to contract in the month and activity levels are exceedingly weak. The sectors sub-index fell by 3.0 points to 28.5, signalling a steeper rate of decline.
■ Commercial construction also contracted at a sharper rate with the sector’s sub index declining by 4.4 points to 29.6 amid a scaling back in public sector construction activity in overall weakness in approvals.
■ There is a distinct movement in the DIY market in residential housing and apartment building remains the weakest performing of the subsectors.
■ The engineering construction sub-index declined by 3.0 points to 32.7 with respondents citing the negative impacts of slower resource sector demand, project delays and strong import competition.
NEW ORDERS BY SECTOR
■ New orders in the house building, commercial and apartment sectors sector continued to decline for 28 consecutive months.
■ For the engineering construction sector, new orders was also less pronounced with a slight increase of 3.9 points to 32.0.
EMPLOYMENT AND WAGES
■ Employment continued to contract and at a steeper rate than the previous month.
■ where employment levels fell, reports indicate that this was in line with decreasing workloads and efforts to reduce cost.
■ Growth in wages continued in September albeit at a slower rate than the previous month’s.
DELIVERIES, INPUT COSTS AND SELLING PRICES
■ Deliveries of inputs from suppliers continued to decline in response to the weakness in new orders.
■ Fierce competition for available work saw a steeper contraction in selling prices, with the sub index declining by 2.6 points to 35.9 in the month.
AREA | SEPT 12 Index | AUG 12 Index | Mth. Change | DIRECTION | Rate of Change | TREND in MTHS.** |
Aust. PCI | 30.9 | 32.2 | -1.3 | Contracting | Faster | 28 |
Activity | 30.4 | 31.2 | -0.8 | Contracting | Faster | 29 |
-Housing | 28.5 | 31.5 | -3.0 | Contracting | Faster | 28 |
-Apartments | 26.0 | 22.1 | + 3.9 | Contracting | Slower | 29 |
-Commercial | 29.6 | 34.0 | -4.4 | Contracting | Faster | 27 |
-Engineering | 32.7 | 35.7 | -3.0 | Contracting | Faster | 9 |
New orders | 29.1 | 28.1 | + 1.0 | Contracting | Slower | 28 |
Employment | 33.0 | 35.4 | -2.4 | Contracting | Faster | 28 |
Deliveries | 32.1 | 37.2 | -5.1 | Contracting | Faster | 26 |
Input prices | 68.3 | 72.2 | -3.9 | Expanding | Slower | 85 |
Selling prices | 35.9 | 38.5 | -2.6 | Contracting | Faster | 23 |
Wages | 58.0 | 62.5 | -4.5 | Expanding | Slower | 42 |
Capacity | 63.8 | 63.0 | +0.8% points | Higher | NA | NA |
*Results are based on a sample of over 150 companies. **Number of months moving in the current direction.
GLOBAL COMPARISONS (index out of 100)
AUSTRALIA | UNITED KINGDOM | GERMANY | IRELAND |
30.9 down on August | 49.0 down on August | 47.8 up on August | 40.7 down on August |
INDUSTRY SECTOR COMPARISONS
Manufacturing | Services | Construction | |
PERIOD | September 2012 | September 2012 | September 2012 |
LEVEL | 44.1 | 41.9 | 30.9 |
MONTHLY CHANGE | -1.2 | -0.5 | -1.3 |
DIRECTION (From 50) | Contracting | Contracting | Contracting |
TREND DIRECTION (Mth) | 7 | 8 | 28 |
Jim Vaughan
Chief Executive Officer
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