Construction Industry Decline Eases in June

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Monday, July 8th, 2013
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Overall conditions throughout the building and construction industry in Australia continued to deteriorate last month but did so a moderating pace, indicating the trough experienced by the industry over the last three years may finally be easing.

Published by Australian Industry Group in conjunction with Housing Industry Association, the Australian Performance of Construction Index (Australian PCI®) came in at 39.5 in June – still well below the 50.0 mark which separates improving conditions from deteriorating conditions, but up 4.2 points compared with the previous month.

This means whilst overall industry conditions continue to deteriorate (as has now been the case for 37 months on end), the extent of that deterioration moderated  and was less intense than at any other time in the past four months.

Across, the sub-sectors, whilst the decline in new orders in civil construction deepened, that in both activity and new orders eased substantially across the housing, commercial  and apartment building sectors.

key findings chart

Australian Industry Group Director of Public Policy Peter Burn welcomed what he describes as early signs of a ‘rebalancing’ within the industry, in terms of an easing in residential building and commercial building conditions.

“This is offsetting the slowing of activity and new orders in engineering construction as the expansion in new capacity in the mining sector is scaled back and in the absence of a significant pipeline of new infrastructure projects” Burn says.

Housing Industry Association Chief Economist Harley Dale says the latest easing in activity is encouraging, but warns the industry is still in decline and any recovery remains fragile.

Dale repeated calls for further monetary policy easing and policy action to stimulate building activity and address long term concerns over housing supply.

activity by sector

Key Findings

Key findings of the report were as follows:

  • The Australian PCI® rose 4.2 points from 35.3 to 39.5 in June – well below the 50.0 mark separating improving conditions from deteriorating conditions but indicating a moderation in the pace of deterioration.
  • The industry has now contracted for 37 months on end.
  • Declines in activity eased across all sectors (see chart)
  • Declines in new orders (steady at 34.8) intensified in civil construction but eased in house building, commercial and apartments.
  • Whilst wages (56.3) increased at a steady pace, employment (40.3) continued to decline albeit at a slightly moderating rate, survey respondents citing insufficient workload and cost considerations as primary factors behind decisions to reduce headcount.
  • Selling prices (37.4) remain on a downward spiral even as input prices (66.5) continue to rise, underscoring continued pressure on profit margins.
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