Australian construction sector declines in April from previous month despite rise in residential building; Australian Industry Group/Housing Industry Assn. Australian Performance of Construction Index down 0.3 points to 45.9

CAMPBELL, Australia , May 7, 2014 (press release) – Although there were improvements across house and apartment building in April, the overall performance of the construction sector slipped again in April with the latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (AustralianPCI®) remaining in contractionary territory at 45.9, a drop of 0.3 points (readings below 50 indicate a contraction in activity).

Commercial construction fell 10.8 points to 45.7 with patchy economic conditions affecting major commercial activity. Engineering was also weaker, falling 6.3 points to 39.2. The new-orders subindex, which is an indicator of future activity, was down 1.7 points to 46.6.

Australian Industry Group Director-Public Policy, Peter Burn, said: "The deepening slide in engineering construction is overshadowing the growth in residential building activity and the tentative recovery of commercial construction as seen in the expansion in April of new commercial construction orders. While there are some promising new engineering construction projects in the resources sector such as the West Pilbara Iron Ore Project boosted by the recent announcement by Aurizon and Baosteel Resources, the pipeline of large resources and energy projects is clearly drying up. Against this background, the Commonwealth Budget provides a timely opportunity to boost non-mining infrastructure investment and address business concerns about an excessive withdrawal of public sector demand," Dr Burn said.

Housing Industry Association Economist, Diwa Hopkins, said: “The continuing success story of the Australian PCI® in 2014 is house building, with the segment expanding for eight consecutive months. Acceleration in the rate of expansion during April also provides cause for further optimism. It is also encouraging to see that after experiencing three consecutive months of contraction, the apartment building sub-index has returned to expansionary territory in April. The residential construction  sector has a large reach into the broader domestic economy and it will become increasingly important in 2014. This is especially the case given the return to contractionary conditions experienced in the wider construction sector, a situation that has prevailed in 2014 thus far,” Ms Hopkins said.

Australian PCI® Key Findings for April:

•The AustralianIndustry Group/HousingIndustry Association Australian Performance of Construction Index (Australian PCI®) has recorded its fourth consecutive month of contraction with a drop of 0.3 points to 45.9 in April to remain below the 50 point level separating expansion from contraction.
•Across the sub-sectors: House building rose 3.8 points to 54.6, apartment building was 12.3 points stronger to reach 57.9, commercial construction dropped 10.8 points to 45.7 while engineering construction fell 6.3 points to 39.2.
•The new orders sub-index recorded 46.6 in April.
•Input prices were lower but the index remained high at 68.4.
•Construction employment was also weaker (43.3).

Further Comment:
Peter Burn, Ai Group: 02) 9466 5503 or 0427 666 579
Diwa Hopkins, HIA: 02) 6245 1355
 
Media enquiries: Tony Melville (Ai Group) – 0419 190 347

Background:
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) 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 that 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. Results are based on responses from over 150 companies.

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