PERFORMANCE OF CONSTRUCTION INDEX®

MAY 2013
MAY
60 55 50
®

DOWNTURN IN CONSTRUCTION INDUSTRY EXTENDS TO THREE YEARS
KEY FINDINGS
■■ The national construction industry continued to exhibit substantial

UK CONSTRUCTION INDEX* 

weakness in May, contracting at a rate that was unchanged from April. The recent pick-up in building approvals and housing finance has yet to translate into an improvement in overall levels of activity. ■■ The seasonally adjusted Australian Industry Group/ Housing Industry Association Australian Performance of Construction Index (Australian PCI®) registered 35.3 in May. This is just 0.1 points above the reading in April and slightly below (2.7 points) the average level of the past three years. The May reading marks the 36th consecutive month that the index has been below the critical 50 points level (that separates expansion from contraction). ■■ The house building sector weakened for a third consecutive month, with activity recording the sharpest rate of contraction in eight months. In contrast, commercial construction activity declined at a slower pace while rates of contraction in apartment building and engineering construction were unchanged on the previous month. ■■ Respondents linked the weak state of the industry to subdued demand conditions, citing low levels of new orders, slow public sector building activity and a reduction in mining-related construction work. House builders also noted that caution on the part of prospective buyers had continued to constrain activity in the month.

65
Increasing

AUSTRALIAN PCI

35.3

45 40 35

60 55 Diffusion Index 50 45 40 35 30 25

APR FEB

30

Decreasing

APR

60 55 50 45 40 35

May 10

Aug 10

Nov 10

Feb 11

May 11

Aug 11

Nov 11

Feb 12

May 12

Aug 12

Nov 12

Feb 13

Australian

PCI®

3 month moving average

CONSTRUCTION ACTIVITY AND CAPACITY
■■ In seasonally adjusted terms, the activity sub-index registered 34.1

65 60 55 Diffusion Index 50 45 40 35 30 25
May 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13 May 13

May 13

49.4

85 80 75 70 65 60 55 50 Capacity Utilisation % (unadjusted)

MAR FEB

30

in May.
■■ This was 0.6 points below the level in the previous month, indicating

GERMANY CONSTRUCTION INDEX*

a slightly steeper rate of contraction in total industry activity. ■■ Subdued demand conditions drove continued declines in activity on a broad industry front. ■■ The rate of capacity utilisation (not seasonally adjusted) rose from an eight month low of 63.5% in April 2013 to 65.0%.

APR

60 55 50 45 40 35

48.8

20

Activity

Capacity Utilisation

ACTIVITY BY SECTOR
■■ The house building activity sub-index declined by a marked 7.4 points

70
Increasing

MAR FEB

65 60 55 Diffusion Index 50 45

30

IRELAND CONSTRUCTION INDEX*

May 10

Aug 10

Nov 10

Feb 11

May 11

Aug 11

Nov 11

Feb 12

May 12

Aug 12

Nov 12

Feb 13

May 13

to 30.4 in May, the third consecutive month of contracting activity after the marginal expansion in February. ■■ The rate of decline in commercial construction activity moderated with the sub-index rising by 6.2 points to 37.5. This was the slowest rate of decline for the sector in four months. ■■ The apartment building sector remained subdued with a sub-index reading of 34.5. This was 0.3 points above the level of the previous month, indicating a broadly unchanged rate of contraction in activity. ■■ The engineering construction sub-index was also broadly steady in May, falling by 0.1 points to 34.3. Slower demand from the resources sector was noted as the main factor inhibiting activity.

APR

60 55

Decreasing

40 35 30 25 20

41.9

50 45 40 35

Houses

Apartments

Commercial

Engineering

MAR FEB

30

Supported by:
*Prepared by Markit Economics

www.markiteconomics.com

■■ New orders (seasonally adjusted) contracted in May for the 36th

consecutive month.
Diffusion Index

60

Increasing

NEW ORDERS AND DELIVERIES
■■ Moreover, the rate of decline was steeper with the new orders

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

index declining by 2.9 points to 34.8.
■■ All four sub-sectors recorded a decline in new orders. Weakness

50

May 10

Aug 10

Nov 10

Feb 11

May 11

Aug 11

Nov 11

Feb 12

May 12

Aug 12

Nov 12

Feb 13

New Orders

Deliveries

NEW ORDERS BY SECTOR
■■ The contraction of new orders in the house building sector was

80 70 60 Diffusion Index 50 40 30 20 10
Increasing Decreasing

steeper in May with the sub-index falling by 2.5 points in the month to 31.7. This was the weakest reading (and therefore the sharpest rate of contraction) in seven months. ■■ In apartment construction, the new orders sub-index declined by 8.9 points to 27.2 signalling a substantial loss of ground in May after showing modest improvement (+4.4 points) in the previous month. ■■ For the commercial construction sector, new orders also moved further into negative territory with the sub-index declining by 5.2 points to 33.4. ■■ In the engineering construction sector, the new orders sub-index increased by 0.1 points to 40.5, signalling that the rate of contraction in the forward work pipeline was broadly unchanged from April.

May 13

was particularly evident in apartment construction where the rate of contraction was notably steeper in the month. ■■ Businesses responded to the sustained contraction in new orders by reducing deliveries of inputs from suppliers at a more pronounced rate. The supplier delivery index declined by 4.2 points in May to 36.2.

30

20

Decreasing

40

May 10

Aug 10

Nov 10

Feb 11

May 11

Aug 11

Nov 11

Feb 12

May 12

Aug 12

Nov 12

Feb 13

May 13

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

Houses

Apartments

Commercial

Engineering

EMPLOYMENT AND WAGES
■■ Employment continued to contract, although the rate of decline

80 70 60 50 40 30 20

moderated after weakening markedly in the previous month. points from April’s 7½ year low level. ■■ Insufficient workloads and attempts to reduce costs were the main factors behind the on-going decline in employment ■■ Growth in wages continued in May and at a slightly faster rate, with the wages sub-index increasing by 0.9 points to 55.9.
Diffusion Index

■■ The employment sub-index registered 36.7 in May, a rise of 6.9

Increasing

Employment

Average Wages

INPUT COSTS AND SELLING PRICES
■■ Input price inflation picked up further in May. The input costs

100 90
Increasing

sub-index registered 73.4, a rise of 5.1 points from April, and the highest rate of increase in 11 months. ■■ Selling prices continued to decline for the 31st consecutive month, with the sub-index falling by 6.0 points to 29.9 in May. This was the lowest reading (and therefore the sharpest rate of decline) in the history of this sub-index (commencing in January 2008). ■■ These results highlight the tightening squeeze on profit margins for construction businesses amid rising cost burdens and intensely competitive tender pricing.

80 Diffusion Index 70 60 50

© 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
AIG13806

Aug 10

Nov 10

Aug 11

Nov 11

Aug 12

May 10

May 11

May 12

Nov 12

Feb 11

Feb 12

Feb 13

30 20

May 10

Aug 10

Nov 10

Feb 11

May 11

Aug 11

Nov 11

Feb 12

May 12

Aug 12

Nov 12

Feb 13

Input Prices

Average Selling prices

AUSTRALIAN PCI®*
ACTIVITY – HOUSES – APARTMENTS – COMMERCIAL – ENGINEERING NEW ORDERS EMPLOYMENT DELIVERIES INPUT PRICES SELLING PRICES WAGES CAPACITY(%) May 2013 April 2013 Monthly Change Direction Rate of Change Trend ** (Months) 36 37 3 37 35 3 36 36 34 93 31 50 na AUSTRALIAN PCI® 35.3 34.1 30.4 34.5 37.5 34.3 34.8 36.7 36.2 73.4 29.9 55.9 65.0 35.2 34.7 37.8 34.2 31.3 34.4 37.7 29.8 40.4 68.3 35.9 55.0 63.5 +0.1 Contracting -0.6 Contracting -7.4 Contracting +0.3 Contracting +6.2 Contracting -0.1 Contracting -2.9 Contracting +6.9 Contracting -4.2 Contracting +5.1 Expanding -6.0 Contracting +0.9 Expanding Higher Slower Faster Faster Slower Slower Faster Faster Slower Faster Faster Faster Faster na

+1.5% points

Results are based on the responses of around 150 businesses. Forward seasonal factors were generated by the ABS in April 2013. **Number of months moving in current direction

Supported by:
www.markiteconomics.com

May 13

Decreasing

40

May 13

Sign up to vote on this title
UsefulNot useful