Construction Decline Eases

The pace of deterioration in business conditions within the construction industry in Australia has eased, with the latest figures showing a slowing in the rate of industry decline amid less pronounced declines in new orders and supplier deliveries.

In October, the Australian Industry Group/Housing Industry Association Performance of Construction Index (Australian PCI?), a composite index measuring overall conditions in the construction industry, increased by 4.9 points to come in at 35.8 ? way off the 50.0 mark separating increasing activity from activity declines but still representing the highest level on record since January (see chart).

This means that whilst overall conditions continued to deteriorate last month, the pace of that decline has eased when compared with previous months.

Leading the slowing in rate of deterioration was a less pronounced decline in new orders (36.8) and supplier deliveries (41.5), whilst the housing, commercial and engineering sub-sectors each recorded marked slowdowns in decline.

Australian Industry Group Director of Public Policy Dr Peter Burn says the new figures are encouraging notwithstanding the fact that conditions in residential and commercial building remain weak ? as does building industry employment.

?While the construction industry and particularly the commercial and residential construction sub-sectors are still contracting, the?Australian PCI??took a turn for the better in October with a cooling in the pace of decline? Burns says.

?This was most noticeable in the long-suffering house building sub-sector where a combination of lower interest rates and a shift in the focus of new home buyer support have helped slow the pace of contraction?.

Housing Industry Association Chief Economist Harley Dale agrees.

?An October reading of 35.8 remains very weak, but at least the pace of contraction has eased? Dale says.

?Signs of a recovery in residential construction are tentative to date, and have generally been over-played, but if we were to see a sustained improvement in key sub-indices of the?Australian PCI? ? new orders for example ? over coming months, then that would be a key signal of a turnaround?.

Key points:

• The overall Australian PCI??lifted 4.9 points to 35.8 ? the highest reading since January but below the 50.0 level separating expanding activity from contracting activity.
• The index has now remained below 50.0 (indicating a contraction in activity) for 29 months on end.
• House building activity was up 12.5 points to 41.0 in October; commercial construction also contracted at a slower rate ? 37.4, apartment building was 27.6 and the engineering construction sub-index increased by 2.4 points to 35.1.
• New orders (36.8) declined for the 29th consecutive month, but did so at the slowest rate for ten months.
• Tight credit conditions, project delays and uncertainty about the economic outlook affected activity in the month.
• Employment (32.0) registered its second fastest decline in at least two years, whilst growth in wages (54.7) continued ? albeit at a slower rate than in the previous month.
• Profit margin pressure remains as input prices (71.6) continue to increase whilst selling prices (37.8) have contracted for the past eleven months.

By Andrew Heaton

Source: http://designbuildsource.com.au/construction-decline-eases?utm_source=rss&utm_medium=rss&utm_campaign=construction-decline-eases

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