PERFORMANCE OF CONSTRUCTION INDEX®

NOVEMBER 2012
NOV
60 55 50
®

CONSTRUCTION DEClINE EASES AGAIN IN NOVEMBER
KEY FINDINGS
■■ The national construction industry continued to contract in ■■

Diffusion Index

■■

■■

UK CONSTRUCTION INDEX*

■■

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.

AUSTRAlIAN pCI

65 60 55 50 45 40 35 30 25

AUST
Increasing

37.0

45 40 35

OCT MAR FEB

30

Decreasing

Nov 10 Dec 10 Jan 11 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

OCT 50.9

60 55 50 45 40 35

Australian PCI®

3 month moving average

UK

CONSTRUCTION ACTIVITY AND CApACITY
■■ In seasonally adjusted terms, the activity sub-index registered 35.8

60 55 50
Diffusion Index
Capacity Utilisation

80
Capacity Utilisation % (unadjusted)

SEP MAR FEB

GERMANY CONSTRUCTION INDEX*

in November. ■■ This was 0.6 points above the level in the previous month, indicating a slight easing in the rate of contraction in total industry activity. ■■ This result reflected the influence of slower rates of decline in apartment building and engineering construction. ■■ Construction capacity utilisation remained at a weak level, although the rate improved from of 63.7% in October to 65.6% in November.

30

75

45 40
Activity

OCT

60 55 50 45 40 35

70

35 30 25 20 65

44.6

GERMANY
Nov 10 Dec 10 Jan 11 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

60

ACTIVITY BY SECTOR

75 70 65 60
Diffusion Index
Increasing

SEP MAR FEB

30

■■ House building conditions remained subdued with the sector’s

IRElAND CONSTRUCTION INDEX*

Nov 10 Dec 10 Jan 11 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

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 of 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.

55 50 45 35 30 25 20 15 40

OCT

60 55 50 45 40 35

IRELAND

Decreasing

42.6

Houses

Apartments

Commercial

Engineering

MAR FEB SEP

30

Supported by:
*Prepared by Markit Economics

www.markiteconomics.com

NEW ORDERS

70
Increasing

■■ New orders (seasonally adjusted) declined in November for the 30th

consecutive month. ■■ Moreover, the rate of decline was more pronounced with the new orders index declining by 2.5 points to 34.3. ■■ All of the four broad sub-sectors recorded a contraction in new orders, although the pace of decline accelerated only in engineering construction. ■■ The further fall in new orders indicates that the industry is likely to remain in a state of contraction over coming months.

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

60
Diffusion Index

50

30

20
Nov 10 Dec 10 Jan 11 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

NEW ORDERS BY SECTOR

■■ New orders in the house building sector declined at a slower rate

75 65 60
Diffusion Index
Increasing Decreasing

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.

70

55 50 45 40 35 30 25 20 15
Nov 10 Dec 10 Jan 11 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

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
Increasing Decreasing

■■ 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

70 65
Diffusion Index
Average Wages

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.

60 55 50 45 40 35 30 25
Nov 10 Dec 10 Jan 11 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

Employment

DElIVERIES, INpUT COSTS AND SEllING pRICES

95 90 85 75 70 65 60 55 50 45 40 35 30
Nov 10 Dec 10 Jan 11 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 Decreasing Increasing

■■ Deliveries of inputs from suppliers continued to decline in November. ■■ Consistent with the steeper overall decline in new orders, the rate

80

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.

© The Australian Industry Group, 2012 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
AIG12435

Deliveries

Input Prices

Average Selling prices

AUSTRAlIAN pCI®*
November 2012 AUSTRAlIAN pCI® ACTIVITY - HOuSES - APARTMENTS - COMMERCIAl - ENGINEERING NEW ORDERS EMplOYMENT DElIVERIES INpUT pRICES SEllING pRICES WAGES CApACITY(%) 37.0 35.8 40.8 42.5 37.5 36.3 34.3 41.1 37.8 65.1 31.8 54.3 65.6 October 2012 35.8 35.2 41.0 27.6 37.4 35.1 36.8 32.0 41.5 71.6 37.8 54.7 63.7 Monthly Change +1.2 +0.6 -0.2 +14.9 +0.1 +1.2 -2.5 +9.1 -3.7 -6.5 -6.0 -0.4 +1.9 % points Direction Contracting Contracting Contracting Contracting Contracting Contracting Contracting Contracting Contracting Expanding Contracting Expanding Higher Rate of Change Slower Slower Faster Slower Slower Slower Faster Slower Faster Slower Faster Slower na Trend ** (Months) 30 31 30 31 29 11 30 30 28 87 25 44 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

Supported by:
www.markiteconomics.com

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