Archive, Industry News

Construction sector suffers further downturn in new year

Declines in construction activity and new orders in January are contributing to a further decline in the performance of Australia's construction sector, latest industry figures reveals.

The most recent Australian Performance of Construction Index
(Australian PCI), compiled by the Australian Industry Group/Housing
Industry Association
, shows a drop of 2.6 points from
December’s figure to 36.2 in January. (readings below 50 indicate a
contraction in the industry with the distance from 50 indicative of
the strength of the decline.)

This comes despite welcome news of
the downturn easing slightly late last year

All major sub-sectors continued in the red with house building
being the worst performer at 36.1.

The sector-wide new orders sub-index, which fell to 37.0, has
now been in decline for 32 consecutive months. New orders in the
residential sub-sectors all fell noticeably in January.

Australian Industry Group’s Director of Public Policy Peter Burn
says the slump looks set to continue.

“The impacts are being felt not only by the businesses and
employees directly involved in the industry but also across the
broader economy as industries in both the services and
manufacturing sectors feel the pinch from the prolonged
sluggishness in house, apartment and construction building,” he

Burns says slowing activity in the engineering construction
sector is adding pressure on the broader construction industry,
with reduced interest rates last year yet to take effect.

“The reductions in interest rates between May and December last
year are yet to deliver a pick-up in activity- particularly in the
commercial and residential sectors where the cuts were expected to
have the greatest effect,” he says.

Housing Industry Association Chief Economist Harley Dale says
the Australian PCI for January is a very disappointing update on
the sector.

“A contraction at a faster rate for the headline index and a
number of sub-indices at the beginning of 2013 is not the new entry
required to suggest we are on the cusp of a recovery in
non-resource construction investment,” he says.

“In terms of residential construction, the indications from the
Australian PCI measures are that a sustainable recovery in either
detached houses or apartments is some distance away.”

Key findings of the report for January are as follows:

  • The latest Australian PCI lost 2.6 points to record 36.2 in
    January (readings below 50 indicate a contraction in the industry
    with the distance from 50 indicative of the strength of the
  • The Australian PCI has now been contracting for 32 consecutive
    months. Many businesses linked the ongoing decline in activity to
    poor market demand including limited opportunities for new work.
    Project delays also continue to bite.
  • The new orders sub-index was 37.0 points in January.
  • Across the sub-sectors: The house building sub-index was 1.4
    points higher at 36.1, apartment building was 1.2 points weaker at
    38.9, commercial construction dropped 6.1 points to 40.1 and
    engineering construction was up 0.2 points to 38.7
  • The input prices sub-index remained high at 63.5.
  • At 33.3 – it was another weak month for the sector’s employment

to read the full report for January.

Send this to a friend