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Slowdown in Australia’s construction industry

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World Cement,

Despite improvements across house and apartment building, the overall performance of the construction sector slipped again in April 2014 with the latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) remaining in contractionary territory at 45.9, a decreaseof 0.3 points (readings below 50 indicate a contraction in activity). Commercial construction fell by 10.8 points to 45.7, with patchy economic conditions affecting major commercial activity. Engineering also fell by 6.3 points to 39.2. The new-orders sub index, which is an indicator of future activity, decreased by 1.7 points to 46.6.

Peter Burn, Australian Industry Group Director – Public Policy, 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.”

Diwa Hopkins, Housing Industry Association Economist, commented: "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.”

April highlights

  • The Australian PCI® recorded its fourth consecutive month of contraction with a drop of 0.3 points to 45.9 in April.
  • House building rose 3.8 points to 54.6.
  • Apartment building improved by 12.3 points,to reach 57.9.
  • Commercial construction dropped 10.8 points to 45.7.
  • Engineering construction fell 6.3 points to 39.2.
  • The new orders sub-index recorded 46.6 in April 2014.
  • Input prices were lower but the index remained high at 68.4.
  • Construction employment was also weaker at 43.3.

Adapted from press release by Rosalie Starling

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