QTPA Member Alert | CONSTRUCTION DECLINE EASES AGAIN IN NOVEMBER (14/12/2012)

CONSTRUCTION DECLINE EASES AGAIN IN NOVEMBER

Attached is the latest November 2012 “performance of construction index” released by the Australian Industry Group (AIG) and Housing Institute of Australia (HIA) for your background and information.

 KEY FINDINGS

■ The national construction industry continued to contract in November, although the pace of decline moderated for a second consecutive month.

■ November saw both activity and employment contract at a slower rate. However, underlining the fragility of overall demand, new orders and deliveries from suppliers declined more sharply.

■ The seasonally adjusted Australian Industry Group/ Housing Industry Association Performance of Construction Index increased by 1.2 points in November to 37.0. The index has now remained below the critical 50-point level (that separates expansion from contraction) for 30 consecutive months.

■ By sector, the rate of contraction in house building and commercial construction remained broadly unchanged from the previous month. In contrast, apartment building activity declined at its slowest

pace in almost two years, while the rate of decline in engineering construction activity eased slightly during the month.

■ Businesses that reported declines in activity mainly linked this to subdued demand conditions and the undermining influences of project delays, a lack of public sector tenders and tight credit conditions. However, on a positive note, house builders continued to report an improvement in customer enquiries and first home buyer activity.

ACTIVITY BY SECTOR

■ House building conditions remained subdued with the sector’s activity sub-index registering 40.8. This was 0.2 points below the previous month’s reading, signalling a broadly unchanged rate of

contraction in November.

■ The apartment building activity sub-index increased markedly by 14.9 points in November to 42.5, the sector’s slowest rate of contraction since February 2011.

■ Commercial construction again contracted sharply, although its rate f decline was broadly unchanged from the previous month, with the activity sub-index rising by 0.1 points to 37.5.

■ The rate of decline in engineering construction moderated slightly in November with the sector’s sub-index rising by 1.2 points to 36.3.

NEW ORDERS BY SECTOR

■ New orders in the house building sector declined at a slower rate for a second consecutive month with the sub-index rising by 6.6 points in November to 37.9, a further sign that the lower interest

rate environment is starting to have an influence on demand within the sector.

■ In the commercial construction sector, the new orders sub-index was steady at 36.8, indicating an unchanged rate of contraction in November.

■ For the engineering construction sector, the contraction in new orders was more pronounced with the sub-index declining by 13.8 points to 30.8. This more than offset the increase recorded in the

previous month.

■ In the apartment sector, the new orders sub-index rose by 6.3 points to 33.0, the slowest rate of contraction for eight months.

EMPLOYMENT AND WAGES

■ Employment contracted at a slower rate following the steeper pace of decline in each of the previous two months.

■ The employment sub-index registered 41.1 in November, a rise of 9.1 points on the previous month.

■ This result mainly reflected the influence of additions to workforces by businesses in the house building sector.

■ Growth in wages continued in November, although at a broadly unchanged rate with the wages sub-index declining by 0.4 points to 54.3.

DELIVERIES, INPUT COSTS AND SELLING PRICES

■ Deliveries of inputs from suppliers continued to decline in November.

■ Consistent with the steeper overall decline in new orders, the rate of decline was also more pronounced in November with the supplier delivery index falling by 3.7 points to 37.8.

■ Input price inflation moderated in November. The input costs sub-index registered 65.1, a decline of 6.5 points from the previous month.

■ Reflecting strong competition for available work, selling prices again contracted, and at a steeper pace with the sub-index declining by 6.0 points to 31.8 in the month.

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

GLOBAL COMPARISONS (index out of 100)

INDUSTRY SECTOR COMPARISONS

Jim Vaughan, CEO