Latest construction figures show some hope left

THE national construction industry continued to contract in June - albeit at a slower pace - with positive trends emerging in a number of key areas.

The latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) lifted by 4.2 points in June to 39.5, meaning the construction industry's freefall has slowed (readings below 50 indicate a contraction in the industry with the distance from 50 indicative of the strength of the decline).

Activity across industry contracted at a slower rate in June with reports from survey respondents pointing to an uptake in new work in the month. 

The strengthening was most pronounced for the apartment, house building and commercial construction sub-sectors.

New work orders also made something of a comeback, though engineering construction still fell sharply by 13 points down to 27.5.

Overall the new orders sub-index remained unchanged at 34.8. Input costs - while still expanding - declined 6.8 points.

Australian Industry Group Director Public Policy, Peter Burn, said that while construction is continuing to contract, there are early signs of "rebalancing"

"The pace of slowing easing markedly in the residential and commercial construction sub-sectors both in terms of activity and new orders."" 

"This is offsetting the slowing of activity and new orders in engineering construction as the expansion in new capacity in the mining sector is scaled back and in the absence of a significant pipeline of new infrastructure projects. 

"There are two key factors that would help lock-in the rebalancing of the construction sector - a pick-up in household and business confidence and a commitment to a much-needed program of renewal of the nation's infrastructure.""

Housing Industry Association Chief Economist Harley Dale agreed.

"While the Australian PCI figures for June confirm that construction activity is continuing to decline, the deceleration of the pace of contraction is encouraging."

"Nonetheless, this update underlines the fact that the industry has a long way to go before we are back in expansion mode.

"Indeed, it is over three years since growth was recorded in the construction industry. While the move in June is a step in the right direction, today's figures emphasise the reality that the recovery is fragile; intervention from the RBA and government policy action will be important in ensuring that the level of residential construction activity will recover to levels high enough to provide for Australia's long term housing needs," Mr Dale said.

Australian PCI Key Findings for June:

  • The latest seasonally adjusted Australian Industry Group/ Housing Industry Association Australian Performance of Construction Index (Australian PCI) rose 4.2 points to 39.5 in June to remain below the 50 point mark separating expansion from contraction.
  • The Australian PCI has now been contracting for 34 consecutive months.
  • Overall construction activity was up 7.3 points to 41.4.
  • The new orders sub-index remained unchanged at 34.8, although new orders declined at a slower pace in the house building, apartments and commercial construction sectors.
  • Selling prices increased 7.5 points to 37.4.
  • Project delays, tight credit conditions, low consumer confidence and weaker mining-related construction work were cited by respondents as restricting growth in the month.

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