PERFORMANCE OF CONSTRUCTION INDEX

JUNE 2013
JUN
60 55 50

Downturn in Construction Industry Moderates

Key Findings
The national construction industry continued to decline in June,

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Mar 13

Sep 10

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Jun 13

25

UK CONSTRUCTION INDEX*

although the rate of contraction was the slowest in four months. This reflected less pronounced declines in activity, employment and deliveries from suppliers in line with an improvement in new orders across most sectors. The seasonally adjusted Australian Industry Group/ Housing Industry Association Australian Performance of Construction Index (Australian PCI) increased by 4.2 points to 39.5 in June. The index has now remained below the critical 50 points level (that separates expansion from contraction) for 37 consecutive months. By sector, declines in house building, apartments and commercial construction activity were all markedly slower in June. Engineering construction was the weakest performing sector with activity constrained by a particularly steep fall in new orders. Despite reports of an improvement in the uptake of new work in the month, the industry continues to face a tough environment with a number of respondents citing the negative influences of project delays, tight credit conditions, low consumer confidence and weaker mining-related construction work.

65 60 55 Diffusion Index 50 45 40 35 30
Decreasing Increasing

australiaN pCi

39.5

45 40 35

MAY FEB

30

MAY 50.8

60 55 50 45 40 35

Australian

PCI

3 month moving average

Construction activity and Capacity

65 60 55 Diffusion Index 50 45 40 35 30 25
Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13

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

In seasonally adjusted terms, the activity sub-index registered 41.4

APR MAR FEB

30

GERMANY CONSTRUCTION INDEX*

in June. This was 7.3 points above Mays eight-month low of 34.1, indicating a distinctly slower rate of contraction in total industry activity. This result largely reflected an improvement in demand conditions outside of engineering construction. The rate of capacity utilisation (not seasonally adjusted) rose from an eight month low of 65.0% in May 2013 to 68.0%.

MAY 50.6

60 55 50 45 40 35

20

Activity

Capacity Utilisation

Activity by sector
The apartment construction activity sub-index increased by a marked

70 65 60 55 Diffusion Index 50 45
Decreasing Increasing

APR MAR FEB

30

IRELAND CONSTRUCTION INDEX*

Sep 10

Dec 10

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Dec 12

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Mar 13

Jun 13

12.6 points to 47.1 in June, the slowest pace of decline in the 34 months since August 2010. The decline in house building activity also moderated with the sub-index rising by a solid 11.9 points to 42.3. However, this is still 9.2 points below the level recorded in February. The commercial construction sector declined at the slowest rate so far in 2013 with a sub-index reading of 46.0, a rise of 8.5 points from the level of the previous month. The pace of decline in engineering construction was the steepest of all sectors, although the sub-index rose 3.2 points to 37.5 in the month. Weaker demand from the resources sector was noted as the main factor inhibiting activity.

MAY

60 55 50

40 35 30 25 20

42.0

45 40 35

Houses

Apartments

Commercial

Engineering

MAR APR FEB

30

Supported by:
*Prepared by Markit Economics

www.markiteconomics.com

 New orders (seasonally adjusted) contracted in June for the 37th

consecutive month.
Diffusion Index

60

Increasing

New Orders and Deliveries

The overall rate of decline was unchanged 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 steady at 34.8 in June.

However, there were reduced rates of decline in new orders across

50

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Jun 11

Sep 11

Dec 11

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Jun 12

Sep 12

Dec 12

Mar 13

New Orders

Deliveries

New orders by sector

The contraction of new orders in the house building sector

80 70 60 Diffusion Index 50 40 30 20 10
Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13
Increasing Decreasing

moderated in June with the sub-index rising by 7.0 points in the month to 38.7. This was the highest reading (and therefore the slowest rate of contraction) in three months. In apartment construction, the new orders sub-index increased by 11.0 points to 38.2 signalling a substantial recovery of ground in June after a large fall (-8.9 points) in the previous month. For the commercial construction sector, the contraction in new orders was also slower with the sub-index increasing by 7.3 points to 40.7. In the engineering construction sector, the new orders sub-index declined by 13.0 points to 27.5, signalling a further scaling back in the forward work pipeline.

Jun 13

the house building, apartment and commercial construction sectors. In contrast, new orders in the engineering construction sector recorded a much steeper decline. The slower rate of decline in new orders across most sectors led to a less marked reduction in deliveries of inputs from suppliers. The supplier delivery index increased by 7.2 points in June to 43.4.

30

20

Decreasing

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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
Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13

moderated for the second consecutive month. points from May. Insufficient workloads and attempts to reduce costs were the main factors behind the on-going decline in employment Growth in wages continued in June. However, the rate of growth was broadly unchanged from the previous month with the wages sub-index increasing by 0.4 points to 56.3.
Diffusion Index

The employment sub-index registered 40.3 in June, a rise of 3.6

Increasing

Employment

Average Wages

Input costs and selling prices

Input price inflation remained elevated. However, the rate of

100 90
Increasing

increase in input costs moderated with the sub-index declining by 6.8 points to 66.6. The selling prices sub-index increased by 7.5 points to 37.4 in June. Whilst this indicates a slower rate of increase in selling prices in the month, it follows a fall in the sub-index to a five and a half-year low level in May. These results underline continued pressures on profit margins amid still high cost burdens and an intensely competitive tender pricing environment.

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 thispublication.
*Prepared by Markit Economics
AIG13177

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Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13

Input Prices

Average Selling prices

AUSTRALIAN PCI*
Activity - Houses - Apartments - Commercial - Engineering New Orders Employment Deliveries Input Prices Selling Prices Wages Capacity(%) June 2013 May 2013 Monthly Change Direction Rate of Change Trend ** (Months) 37 38 4 38 36 4 37 37 35 94 32 51 na Australian PCI 39.5 41.4 42.3 47.1 46.0 37.5 34.8 40.3 43.4 66.6 37.4 56.3 68.0 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 +4.2 Contracting +7.3 Contracting +11.9 Contracting +12.6 Contracting +8.5 Contracting +3.2 Contracting +3.6 Contracting +7.2 Contracting -6.8 Expanding +7.5 Contracting +0.4 Expanding Higher Slower Slower Slower Slower Slower Slower Slower Slower Slower Slower Faster na

0.0 Contracting Unchanged

+3.0% 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

40