QTPA Member Alert |AiG/HIA PERFORMANCE INDICES AUSTRALIA

AiG/HIA PERFORMANCE INDICES AUSTRALIA

The indices are seasonally adjusted ‘diffusion indexes’, based on a number of key activity indicators including sales, production, new orders, supplier deliveries and employment. In all of these indices, an index reading above 50 points indicates that activity is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline.

SEPTEMBER 2014

•  Construction: 59.1 EXPANDING.

•  Services: 45.4 CONTRACTING.

•  Manufacturing: 46.5 CONTRACTING.

CONSTRUCTION GROWTH AT NINE-YEAR HIGH

COUNTRY COMPARISON:

•  AUSTRALIA 59.1 UP (Sept).

•  UK 64.0 UP. (Aug)

•  GERMANY 47.7 DOWN (Aug).

•  IRELAND 61.4 DOWN (AUG).

KEY FINDINGS

•  The national construction industry maintained its solid growth momentum in September with new orders and activity continuing to expand strongly. This led to the highest rates of increase in employment and deliveries from suppliers since the survey began in September 2005.

•  The seasonally adjusted Australian Industry Group/ Housing Industry Association Australian Performance of Construction Index (Australian PCI®) increased by 4.1 points to 59.1 points in September.

•  This was the fourth consecutive month that the Australian PCI® has been above the critical 50 points level that separates expansion from contraction. Moreover, it signalled the industry’s strongest pace of expansion in the nine years since the survey’s inception.

•  This further upturn in industry conditions reflected expanding activity across most major sectors of the industry. House building was the strongest performing sector with its rate of growth lifting to its highest level so far in 2014. Continued strength was also evident in the apartment building sector (despite a slower rate of increase in the month) while growth in commercial construction picked-up in September. In contrast, engineering construction activity continued to contract, albeit at a slower rate.

•  Businesses reporting an improvement in activity generally attributed this to stronger levels of demand and an associated increase in new orders intakes and tender opportunities. In addition, house and apartment builders indicated that customer enquiries and buyer confidence remained firm, with activity continuing to benefit from solid investor activity. The main factors weighing on activity were a lack of public sector tenders and a decline in mining-related engineering construction activity.

ACTIVITY BY SECTOR

•  House building activity continued to expand in line with the general increase in new orders seen over the past 12 months. This is the highest activity reading for house building (and therefore the strongest rate of expansion) in nine months.

•  Apartment building activity was again robust, despite a slower rate of growth.

•  Commercial construction activity expanded for the third consecutive month in September.

•  Engineering construction activity again contracted in September although at a slower rate.

NEW ORDERS BY SECTOR

•  New orders in house building expanded at a higher rate in September. This was the highest level and the strongest rate of expansion since this sub index began in August 2006. As a consequence, it bodes well for continued strength in house construction activity in coming months.

•  In commercial construction new orders showed further improvement in September, registering growth for the third consecutive month. This was also the highest level for this sub index since August 2006.

•  In apartment building, the new orders subindex expanded for a fifth consecutive month.

•  In engineering construction, the sub index indicated a slower rate of contraction in September and represented the ninth consecutive month of falling new orders.

INPUT COSTS AND SELLING PRICES

•  Stronger demand for construction materials led to a pickup in prices for a second consecutive month.

•  The selling price sub index increased by 2.1 points indicating increases.

•  These pricing results demonstrate that despite an improvement in overall business conditions pressures on profit margins remain strong amid rising cost burdens and a still strongly competitive pricing environment.