PERFORMANCE OF CONSTRUCTION INDEX

APRIL 2013
APR
60 55 50

CONSTRUCTION SECTOR AT SEVEN MONTH LOW IN APRIL

KEY FINDINGS
The national construction industry contracted further in April.

60 55 Diffusion Index 50 45 40 35 30

Increasing

UK CONSTRUCTION INDEX*

Sharper falls in activity, employment and deliveries from suppliers highlighted the deterioration in overall industry conditions. The seasonally adjusted Australian Industry Group/ Housing Industry Association Australian Performance of Construction Index (Australian PCI) declined by 3.8 points in April to 35.2. This was the lowest index reading (and therefore the steepest rate of decline) in seven months. The index has now remained below the critical 50 points level (that separates expansion from contraction) for 35 consecutive months. By sector, house building activity contracted for a second consecutive month, further unwinding the solid improvement recorded in February. Engineering construction also fell further into negative territory. In contrast, the rate of decline in commercial construction activity moderated slightly, although it remains the weakest performing sector. The contraction in apartment building activity was unchanged in the month. Respondents largely attributed the poor state of the industry to subdued demand conditions, citing the negative influences of tight credit conditions, a lack of public sector building activity and a shortage of new tender opportunities. Reports from house builders also indicated a reduction in customer enquiries and weaker order books in the month.

65

AUSTRALIAN PCI

35.2

45 40 35

FEB APR FEB

30

Decreasing

MAR

60 55 50 45 40 35

25
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 Mar 13 Apr 13

47.2

Australian

PCI

3 month moving average

CONSTRUCTION ACTIVITY AND CAPACITY

In seasonally adjusted terms, the activity sub-index registered 34.7

65 60 55 Diffusion Index 50 45 40 35 30 25
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 Mar 13 Apr 13

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

FEB MAR

30

in April.
This was 4.3 points below the level in the previous month, indicating

GERMANY CONSTRUCTION INDEX*

a steeper rate of contraction in total industry activity. Weak demand conditions drove declines in activity on a broad industry front. The rate of capacity utilisation (not seasonally adjusted) dipped from 63.7% in March 2013 to 63.5%, the weakest reading over the past eight months.

MAR

60 55

41.9

50 45 40 35

20

Activity

Capacity Utilisation

ACTIVITY BY SECTOR
The house building activity sub-index declined by a marked 9.2 points

70 65 60 55 Diffusion Index 50 45
Decreasing Increasing

FEB MAR

30

IRELAND CONSTRUCTION INDEX*

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 Mar 13 Apr 13

to 37.8 in April, the second consecutive month of contracting activity after the marginal expansion in February. Commercial construction continued to exhibit the most subdued activity of the four broad sectors with a sub-index reading of 31.3. This was, however, up by 2.0 points on the previous month to indicate a slightly slower rate of decline in April. The decline in engineering construction activity was more pronounced with the sectors sub-index declining by 4.0 points in April to 34.4. Apartment building activity continued to contract sharply, although the rate of decline in April was unchanged from March with the sectors sub-index steady at 34.2.

MAR

60 55

40 35 30 25 20

43.1

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 April for the 35th

consecutive month.
Diffusion Index

60

Increasing

NEW ORDERS AND DELIVERIES

However, the rate of decline was slightly slower with the new

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

orders index increasing by 1.7 points to 37.7.

While all sectors recorded declines in new orders in April, the

50

NEW ORDERS BY SECTOR

The contraction of new orders in the house building sector

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

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 Mar 13 Apr 13

was steeper in April with the sub-index falling by 7.8 points in the month to 34.2. This follows a decline in the index of equal magnitude in the previous month. In apartment construction, the new orders sub-index rose by 4.4 points to 36.1 signalling some recovery of ground after the substantial decline (10.2 points) in March. For the commercial construction sector, the contraction in new orders moderated with the sub-index rising by 9.0 points to 38.6. In the engineering construction sector, the new orders sub-index increased by 3.9 points to 40.4, signalling a slower rate of contraction in the forward work pipeline than that reported in the previous two months.

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 Mar 13 Apr 13

rate of decline moderated in the commercial, apartment and engineering construction sub-sectors. 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 4.1 points in April to 40.4.

30

20

New Orders

Deliveries

Decreasing

40

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 contracted at a steeper rate with the sub-index

80 70 60 50 40 30 20
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 Mar 13 Apr 13

registering 29.8 in April, a decline of 9.4 points from the previous month. This represented the weakest reading (and therefore the steepest rate of decline) in the 7 years since the commencement of the survey. Where employment levels fell, reports indicate that this was in line with subdued levels of incoming work. Growth in wages continued in April and at a faster rate, with the wages sub-index increasing by 4.5 points to 55.0.

Diffusion Index

Increasing

Employment

Average Wages

INPUT COSTS AND SELLING PRICES

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

100 90
Increasing

30 20
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 Mar 13 Apr 13

Input Prices

Average Selling prices

AUSTRALIAN PCI*
ACTIVITY HOUSES APARTMENTS COMMERCIAL ENGINEERING NEW ORDERS EMPLOYMENT DELIVERIES INPUT PRICES SELLING PRICES WAGES CAPACITY(%) April 2013 March 2013 Monthly Change Direction Rate of Change Trend ** (Months) 35 36 2 36 34 2 35 35 33 92 30 49 na AUSTRALIAN PCI 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 39.0 39.0 47.0 34.2 29.3 38.4 36.0 39.2 44.5 65.4 31.6 50.5 63.7 -3.8 Contracting -4.3 Contracting -9.2 Contracting +2.0 Contracting -4.0 Contracting +1.7 Contracting -9.4 Contracting -4.1 Contracting +2.9 Expanding +4.3 Contracting +4.5 Expanding Lower Faster Faster Faster Slower Faster Slower Faster Faster Faster Slower Faster na

0.0 Contracting Unchanged

-0.2% 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

Decreasing

registered 68.3, an increase of 2.9 points from the previous month. Selling prices declined for the 30th consecutive month, highlighting the strong competition for available work that persists across the industry. Despite the continued decline in selling prices (and the consequential pressure on profit margins), the rate of contraction was slower in the month with the sub-index rising by 4.3 points to35.9.

80 Diffusion Index 70 60 50 40

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 thispublication.
*Prepared by Markit Economics
AIG12998