AUSTRALIAN INDUSTRY GROUP/HOUSING INDUSTRY ASSOCIATION –

AUSTRALIAN PERFORMANCE OF CONSTRUCTION INDEX (Australian PCI®)

DOWNTURN IN CONSTRUCTION CONTINUES IN JANUARY 2013

KEY FINDINGS

■■ The downturn in the national construction industry continued in January. Both activity and new orders contracted at steeper rates, unwinding some of the improvement in industry conditions witnessed in late 2012.

■■ The seasonally adjusted Australian Industry Group/ Housing Industry Association Australian Performance of Construction Index (Australian PCI® ) declined by 2.6 points in January to 36.2. The index has now remained below the critical 50 points level (that separates expansion from contraction) for 32 consecutive months.

■■ Reflecting the dampening influence of falling new orders, all major sub-sectors experienced contractions in activity in January. House building was the weakest performing sector (despite a slower pace of decline in activity), while the apartment and commercial construction sectors contracted at steeper rates during the month. Engineering construction declined at a rate that was broadly unchanged from December 2012.

■■ Most businesses linked the ongoing decline in activity to poor market demand, citing limited opportunities to tender for new work and project delays. Difficulties in obtaining finance and weak consumer and investor sentiment had also contributed to a lack of new business.

CONSTRUCTION ACTIVITY AND CAPACITY

■■ In seasonally adjusted terms, the activity sub-index registered 37.7 in January.

■■ This was 1.9 points below the level in the previous month, indicating a steeper rate of contraction in total industry activity.

■■ Weaker demand conditions drove declines in activity on a broad industry front.

■■ Consistent with this, the rate of capacity utilisation fell from 67.3% in December 2012 to 65.8%.

ACTIVITY BY SECTOR

■■ House building conditions remain subdued. However, the sector’s activity sub-index increased by 1.4 points to 36.1 in January to signal a slightly slower rate of contraction.

■■ Apartment building activity was weaker with the sub-index declining by 1.2 points in January to 38.9.

■■ Commercial construction contracted at a steeper rate after exhibiting a notable easing in the previous month. The sector’s sub-index declined by 6.1 points to 40.1 driven by a sharper decline in new orders.

■■ The engineering construction sub-index was broadly unchanged increasing by 0.2 points to 38.7.

 NEW ORDERS BY SECTOR

■■ New orders in the house building sector declined at a steeper rate with the sub-index falling by 1.3 points in January to 32.6.

■■ In commercial construction, the new orders sub-index fell by 10.9 points to 39.4 following a marked easing in the rate of contraction in the previous month.

■■ For the engineering construction sector, the contraction in new orders was also steeper with the sub-index declining by 2.0 points to 42.8. The delayed timing of projects and sluggish government funded infrastructure spending were cited as impacting negatively on the uptake of work.

■■ In the apartment sector, the new orders sub-index declined markedly by 16.7 points to 26.4, the sharpest rate of contraction in five months.

EMPLOYMENT AND WAGES

■■ Employment contracted at a steeper rate for the second consecutive month.

■■ The employment sub-index registered 33.3 in January, a fall of 0.7 points from the previous month.

■■ Where employment levels fell, reports indicate that this was in line with decreasing workloads and efforts to reduce costs.

■■ Growth in wages continued in January, although at a slower rate, with the wages sub-index falling by 4.1 points to 54.5.

DELIVERIES, INPUT COSTS AND SELLING PRICES

■■ Input price inflation moderated in January. The input costs sub-index registered 63.5, a decline of 5.3 points from the previous month.

■■ Selling prices declined for the 27th consecutive month, highlighting the strong competition for available work that persists across the industry.

■■ Despite the continued decline in selling prices, the rate of contraction eased in the month with the sub-index rising by 3.7 points to 39.7.

*Results are based on a sample of over 150 companies. **Number of months moving in the current direction.

GLOBAL COMPARISONS DECEMBER 12 (index out of 100)

INDUSTRY SECTOR COMPARISONS