PERFORMANCE OF CONSTRUCTION INDEX

February 2013
FEB
60 55

SlOweST DeClINe IN CONSTruCTION SINCe MID-2010

Key FINDINGS

45.6
65 60 55 Diffusion Index 50 45 40 35 30 25
Decreasing

50 45 40 35

The national construction industry continued to decline in February,

The seasonally adjusted Australian Industry Group/ Housing Industry

AUST
Increasing

uK CONSTruCTION INDeX*

Association Australian Performance of Construction Index (Australian PCI) increased by 9.4 points in February to 45.6. While still below the critical 50-point level (that separates expansion from contraction), this was the highest reading for the index since June 2010. This largely reflected a substantial improvement in house building activity (which expanded for the first time since May 2010) and a solid rebound in engineering construction. However, apartment and commercial construction activity continued to contract sharply during the month. February data signalled an easing in the rate of contraction in activity, new orders and deliveries from suppliers. This underpinned an improvement in the employment sub-index, which contracted at its slowest rate since growth was last recorded in May 2010. There were encouraging reports from house builders indicating an increase in customer enquiries and an improvement in the uptake of new work in February. However, operating conditions remain extremely difficult with tight credit conditions, a lack of public sector building activity and weak investor sentiment seen as key negative influences on activity.

auSTralIaN pCI

although the rate of contraction was the slowest in close to three years.

JAN MAR FEB

30

JAN

60 55 50 45 40 35

48.7

Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13

Australian PCI

3 month moving average

UK

CONSTruCTION aCTIvITy aND CapaCITy

In seasonally adjusted terms, the activity sub-index registered 46.6

60 55 50 Diffusion Index 45 40 35 30 25 20
Capacity Utilisation Activity

80 Capacity Utilisation % (unadjusted)

DEC MAR FEB

30

GerMaNy CONSTruCTION INDeX*

in February. This was 8.9 points above the level in the previous month, indicating a distinctly slower rate of contraction in total industry activity. Underlying this result was a return to growth in house building and engineering construction, combined with a slower rate of decline in apartment building activity. The rate of capacity utilisation (not seasonally adjusted) rose from 65.8% in January 2013 to 66.6%.

75

JAN

60 55

70

47.7

GERMANY
Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13

65

50 45 40 35

60

aCTIvITy by SeCTOr

75 70 65 60 Diffusion Index 55 50 45
Decreasing Increasing

DEC MAR FEB

30

House building conditions strengthened. The sectors activity sub-index

IrelaND CONSTruCTION INDeX*

increased markedly by 15.4 points to 51.5 in February. This was the first expansion for this sub-sector since May 2010, following 32 consecutive months of decline. A return to growth was also signalled for engineering construction, with the sectors sub-index increasing by 14.5 points to 53.2. The decline in apartment building activity moderated with the sub-index increasing by 3.3 points in February to 42.2. Commercial construction, however, contracted at a steeper rate in the month. The sectors sub-index declined by 11.4 points to 28.7 amid continued weak inflows of new work on commercial building projects.

JAN

60 55

40 35 30 25 20 15
Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13

IRELAND

45.8

50 45 40 35

Houses

Apartments

Commercial

Engineering

MAR FEB DEC

30

Supported by:
*Prepared by Markit Economics

www.markiteconomics.com

 New orders (seasonally adjusted) contracted in February for the 33rd

consecutive month.
Diffusion Index

60

Increasing

New OrDerS aND DelIverIeS

70

whaT IS The auSTralIaN pCI?

The Australian Industry Group Performance of Construction Index (Australian PCI) in conjunction with the Housing Industry Association is a seasonally adjusted national composite index based on the diffusion indexes for activity, orders/new business, deliveries and employment with varying weights. An Australian PCI reading above 50 points indicates construction activity is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline. More information can be obtained from the Ai Group website www.aigroup.com.au

However, the rate of decline was slower with the new orders index

increasing by 4.7 points to 41.7.

This result reflected less pronounced rates of decline in

50

new orders for companies engaged in house building and apartment construction. With aggregate demand showing signs of improvement, deliveries of inputs from suppliers contracted at a slower rate. The supplier delivery index increased by 9.8 points in February to 46.4.

30

20
Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13

New Orders

Deliveries

New OrDerS by SeCTOr

The contraction of new orders in the house building sector eased

75 65 60 Diffusion Index 55 50 45 35 30 25 20 15
Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Decreasing Increasing

markedly in February with the sub-index rising by 17.1 points in the month to 49.7. This was the strongest level for the housing new orders sub-index since May 2010. In apartment construction, the new orders sub-index rose by 12.8 points to 39.2. However, this followed a substantial decline in January, continuing the volatile trend of recent months. For the commercial construction sector, the contraction in new orders was broadly unchanged with the sub-index rising by 0.4 points to 39.8. The delayed timing of projects and sluggish government infrastructure spending were key factors cited as detracting from the uptake of work. In the engineering construction sector, the new orders sub-index declined by 5.1 points to 37.7, indicating a steeper rate of contraction in the forward pipeline after more solid outcomes over the previous two months.

70

40

Decreasing

40

CONTaCT
Peter Burn Director Public Policy Ai Group Tel 02 9466 5503 Harley Dale HIA Chief Economist Tel 02 6345 1329 Markit Economics www.markiteconomics.com

Houses

Apartments

Commercial

Engineering

eMplOyMeNT aND waGeS

80 75
Average Wages
Increasing

The protracted decline in industry employment continued in February,

40 35 30 25

Employment

Decreasing

although the rate of contraction eased markedly in the month. The employment sub-index registered 48.4 in February, a rise of 15.1 points from the previous month. This represented the highest reading (and therefore the slowest pace of decline) in the 33 months since employment last registered growth in May 2010. Growth in wages continued in February and at a faster rate, with the wages sub-index increasing by 5.8 points to 60.3.

70 65 Diffusion Index 60 55 50 45

INpuT COSTS aND SellING prICeS

95 90 85 75 Diffusion Index 70 65 60 55 50 45 40 35 30
Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Decreasing Increasing

Input price inflation picked-up in February. The input costs sub-index

registered 72.1, an increase of 8.6 points from the previous month. Selling prices declined for the 28th 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 was virtually unchanged in the month with the sub-index falling by 0.1 points to 39.6.

80

The Australian Industry Group, 2013 This publication is copyright. Apart from any fair dealing for the purposes of private study or research permitted under applicable copyright legislation, no part may be reproduced by any process or means without the prior written permission of The Australian Industry Group. Disclaimer The Australian Industry Group provides information services to its members and others, which include economic and industry policy and forecasting services. None of the information provided here is represented or implied to be legal, accounting, financial or investment advice and does not constitute financial product advice. The Australian Industry Group does not invite and does not expect any person to act or rely on any statement, opinion, representation or interference expressed or implied in this publication. The Australian Industry Group has compiled this information in conjunction with information provided by HIA. All readers must make their own enquiries and obtain their own professional advice in relation to any issue or matter referred to herein before making any financial or other decision. The Australian Industry Group accepts no responsibility for any act or omission by any person relying in whole or in part upon the contents of this publication.
*Prepared by Markit Economics
AIG12698

auSTralIaN pCI*
February 2013 auSTralIaN pCI aCTIvITy HoUSES APArTMENTS CoMMErCIAl ENGINEErING New OrDerS eMplOyMeNT DelIverIeS INpuT prICeS SellING prICeS waGeS CapaCITy(%) 45.6 46.6 51.5 42.2 28.7 53.2 41.7 48.4 46.4 72.1 39.6 60.3 66.6 January 2013 36.2 37.7 36.1 38.9 40.1 38.7 37.0 33.3 36.6 63.5 39.7 54.5 65.8 Monthly Change +9.4 +8.9 +15.4 +3.3 -11.4 +14.5 +4.7 +15.1 +9.8 +8.6 -0.1 +5.8 +0.8% points Direction Contracting Contracting Expanding Contracting Contracting Expanding Contracting Contracting Contracting Expanding Contracting Expanding Higher Rate of Change Slower Slower From contraction Slower Faster From contraction Slower Slower Slower Faster Faster Faster na Trend ** (Months) 33 34 1 34 32 1 33 33 31 90 28 47 na

*Results are based on a sample of approximately 150 companies. New monthly seasonal adjustment factors were applied in April 2012. ** Number of months moving in current direction

Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13

Input Prices

Average Selling prices

Supported by:
www.markiteconomics.com