Turf QLD Industry Alert | CONSTRUCTION STARTS YEAR ON SOFT FOOTING

 CONSTRUCTION STARTS YEAR ON SOFT FOOTING

Through a general face-to-face, and phone survey over the last when talking to Turf Queensland members generally the turf industry is on an even footing across the state. Obviously North Queensland will improve through the winter months whereas South Queensland will slow up.

The Australian Industry Group (AiG) in conjunction with the Housing Industry Association (HIA) develop a Performance of Construction Index (PCI) which involves data collected from businesses Australia wide on a representative sample basis covering key indicators including sales, production, new orders, supplier deliveries and employment.

The Performance of Construction Index for January 2016 was 46.3 showing it is contracting and below the 50 average level.

The outcomes for January 2016 are below:

KEY  FINDINGS  

• The  seasonally  adjusted  Australian  Industry  Group/Housing  Industry  Association  Australian   Performance  of  Construction  Index  (Australian  PCI®)  fell  by  0.5  points  to  46.3  points  in   January.  This  indicated  a  broadly  unchanged  rate  of  contraction  from  December.
• It  is  the  second  consecutive  month  that  the  Australian  PCI®  has  been  below  the  critical  50   points  level  that  separates  expansion  from  contraction,  following  the  industry’s  return  to  growth   in  August  2015.
• Across  the  four  subsectors  in  the  Australian  PCI®,  apartment  building  returned  to  negative   territory  following  six  months  of  expansion.  House  building  meanwhile  recorded  a  second   month  of  growth,  albeit  at  a  slightly  slower  pace.
• Commercial  construction  was  the  weakest  performing  area  of  construction  activity,  contracting   at  its  sharpest  rate  in  3½  years.
• Engineering  construction  activity  also  remained  subdued,   declining  at  a  broadly  unchanged  rate  from  the  previous  month.
• For  the  construction  industry  as  a  whole,  activity  and  new  orders  recorded  slightly  steeper   declines  in  January  while  supplier  deliveries  turned  down  following  two  months  of  growth.   Employment  edged  higher  in  January,  although  the  pace  of  growth  was  the  second  slowest  in   six  months.   Australian  PCI®  respondents  generally  linked  the  subdued  state  of  the  industry  to  soft  overall   demand  conditions,  citing  a  lack  of  new  work  to  replace  projects  completed  at  the  end  of  2015   and  a  continued  winding  back  in  mining  and  heavy  industrial  construction  work.
• Reports  from  residential  builders  were  mixed.  While  house  building  respondents  to  the   Australian  PCI®  were  generally  positive  in  their  assessment  of  activity  levels,  a  softening  in   apartment  conditions  was  apparent  with  reports  of  fewer  enquiries  in  the  month  and  increased   caution  by  would-­be  purchasers.

CONSTRUCTION  ACTIVITY  AND  CAPACITY  

• The  activity  sub index  in  the  Australian  PCI®  registered  44.2  points  in  January.
• This  was  0.2  points  below  the  level  of  the  previous  month,  signalling  that  the  rate  of  contraction   in  total  industry  activity  was  almost  unchanged  during  January.
• Despite  a  lift  in  house  building  activity,  overall  levels  of  construction  activity  in  January  were   adversely  impacted  by  continued  falls  in  engineering  and  commercial  construction  work  as  well   as  a  renewed  contraction  in  apartment  building  activity.
• The  rate  of  capacity  utilisation  was  lower  at  71.0%  of  capacity  being  utilised  across  the   construction  industry  in  January,  down  from  72.9%  in  December  2015  (not  seasonally   adjusted).  It  was  also  0.6  percentage  points  below  the  12-­month  average  of  71.6%  of  total   industry  capacity  being  utilised.

ACTIVITY  BY  SECTOR  

• House  building  activity  expanded  for  a  second  consecutive  month,  although  at  a  slightly  slower   pace.  The  sector’s  activity  sub-­index  decreased  by  0.3  points  to  52.3  points.  The  housing   activity  sub-­index  has  now  been  positive  in  eight  of  the  past  13  months.
•  Apartment  building  activity  turned  down  in  January  following  seven  months  of  growth.  The   sector’s  sub-­index  declined  by  7.9  points  to  46.4  points,  signalling  the  most  subdued  level  of   activity  (and  therefore  the  highest  rate  of  contraction)  in  12  months.
•  Commercial  construction  contracted  for  the  fourteenth  time  in  the  past  15  months.  The  sector’s   activity  sub-­index  fell  by  3.5  points  to  36.5  points  in  January,  the  sharpest  rate  of  contraction   since  July  2013  (34.6  points).  This  is  consistent  with  the  continuation  of  soft  approval  trends  in   the  sector  and  the  patchy  conditions  across  the  major  commercial  building  categories.
•  Engineering  construction  activity  contracted  for  the  19th  consecutive  month  in  January   reflecting  the  on-­going  decline  in  mining-­related  construction  activity.  The  sector’s  activity

NEW  ORDERS  BY  SECTOR  

• New  orders  in  the  house  building  sector  contracted  for  a  fourth  month  in  January  with  the  sub-­ index  registering  48.7  points.  However,  this  was  an  increase  of  1.0  points  from  December,   indicating  a  slower  rate  of  contraction  in  the  month.
•   In  the  apartment  building  sector,  new  orders  contracted  for  a  second  consecutive  month.  In  a   further  sign  that  demand  for  new  apartment  developments  is  cooling  (relative  to  the  peak  in   early  2015),  the  sector’s  sub-­index  registered  45.9  points  in  January  to  be  2.0  points  below  the   reading  for  December.  It  was  also  the  steepest  rate  of  decline  since  June  2015  (40.4  points).
•  New  orders  continued  to  lose  ground  in  the  commercial  construction  sector  in  January.   Consistent  with  the  overall  softness  in  non-­residential  building  approvals  during  2015,  the  new   orders  sub-­index  decreased  by  4.0  points  to  35.9  points.  This  was  the  lowest  reading  on  new   orders  for  the  sector  since  May  2013  (33.4  points)  and  points  to  continued  weakness  in   commercial  activity  in  coming  months.
• New  orders  in  the  engineering  construction  sector  also  fell  more  sharply  in  January.  The  sub-­ index  decreased  by  1.3  points  in  the  month  to  41.2  points.  This  reflects  the  continued  drag  on   activity  levels  from  a  narrowing  pipeline  of  mining  and  heavy  industrial  projects.