PERFORMANCE OF CONSTRUCTION INDEX

january 2013
JAN
60 55 50

DOwnTurn In COnSTruCTIOn COnTInuES In january

KEy FInDInGS
The downturn in the national construction industry continued in

uK COnSTruCTIOn InDEX*

January. Both activity and new orders contracted at steeper rates, unwinding some of the improvement in industry conditions witnessed in late 2012. The seasonally adjusted Australian Industry Group/ Housing Industry Association Australian Performance of Construction Index (Australian PCI ) declined by 2.6 points in January to 36.2. The index has now remained below the critical 50 points level (that separates expansion from contraction) for 32 consecutive months. Reflecting the dampening influence of falling new orders, all major sub-sectors experienced contractions in activity in January. House building was the weakest performing sector (despite a slower pace of decline in activity), while the apartment and commercial construction sectors contracted at steeper rates during the month. Engineering construction declined at a rate that was broadly unchanged from December 2012. Most businesses linked the ongoing decline in activity to poor market demand, citing limited opportunities to tender for new work and project delays. Difficulties in obtaining finance and weak consumer and investor sentiment had also contributed to a lack of new business.

auSTralIan pCI

65 60 55
Diffusion Index

AUST
Increasing

36.2

45 40 35

50 45 40 35 30 25
Decreasing

DEC MAR FEB

30

Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13

DEC 48.7

60 55 50 45 40 35

Australian PCI

3 month moving average

UK

COnSTruCTIOn aCTIvITy anD CapaCITy

In seasonally adjusted terms, the activity sub-index registered 37.7

60 55 50
Diffusion Index

80
Capacity Utilisation % (unadjusted)

NOV MAR FEB

GErMany COnSTruCTIOn InDEX*

in January. This was 1.9 points below the level in the previous month, indicating a steeper rate of contraction in total industry activity. Weaker demand conditions drove declines in activity on a broad industry front. Consistent with this, the rate of capacity utilisation fell from 67.3% in December 2012 to 65.8%.

30

75
Capacity Utilisation

45 40

DEC

60 55

70
Activity

35 30 25 20 65

43.3

50 45 40 35

GERMANY
Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13

60

aCTIvITy by SECTOr

75 70 65 60
Diffusion Index
Increasing

NOV MAR FEB

30

House building conditions remain subdued. However, the sectors

IrElanD COnSTruCTIOn InDEX*

activity sub-index increased by 1.4 points to 36.1 in January to signal a slightly slower rate of contraction. Apartment building activity was weaker with the sub-index declining by 1.2 points in January to 38.9. Commercial construction contracted at a steeper rate after exhibiting a notable easing in the previous month. The sectors sub-index declined by 6.1 points to 40.1 driven by a sharper decline in new orders. The engineering construction sub-index was broadly unchanged increasing by 0.2 points to 38.7.

55 50 45 35 30 25 20 15
Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13

DEC

60 55 50

IRELAND

Decreasing

40

43.0

45 40 35

Houses

Apartments

Commercial

Engineering

MAR FEB NOV

30

Supported by:
*Prepared by Markit Economics

www.markiteconomics.com

nEw OrDErS anD DElIvErIES

70
Increasing

New orders (seasonally adjusted) contracted in January for the 32nd

consecutive month. Moreover, the rate of decline was sharper with the new orders index decreasing by 5.6 points to 37.0. All four broad industry sectors registered more pronounced rates of decline in new orders with the steepest month-on-month falls recorded in the apartment and commercial construction sectors. Subdued demand and lower workloads resulted in a further contraction in deliveries of inputs from suppliers. The supplier delivery index declined by 0.9 points in January to 36.6.

60
Diffusion Index

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

50

30

20
Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13

New Orders

Deliveries

nEw OrDErS by SECTOr

New orders in the house building sector declined at a steeper rate

75 65 60
Diffusion Index
Increasing Decreasing

Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13

with the sub-index falling by 1.3 points in January to 32.6. In commercial construction, the new orders sub-index fell by 10.9 points to 39.4 following a marked easing in the rate of contraction in the previous month. For the engineering construction sector, the contraction in new orders was also steeper with the sub-index declining by 2.0 points to 42.8. The delayed timing of projects and sluggish government funded infrastructure spending were cited as impacting negatively on the uptake of work. In the apartment sector, the new orders sub-index declined markedly by 16.7 points to 26.4, the sharpest rate of contraction in five months.

70

55 50 45 40 35 30 25 20 15

Decreasing

40

COnTaCT
Peter Burn Director Public Policy Ai Group Tel 02 9466 5503 Harley Dale HIA Chief Economist Tel 02 6345 1329 Markit Economics www.markiteconomics.com

Houses

Apartments

Commercial

Engineering

EMplOyMEnT anD waGES

consecutive month.

80 75
Average Wages
Increasing

Employment contracted at a steeper rate for the second The employment sub-index registered 33.3 in January, a fall of 0.7

70 65
Diffusion Index

40 35 30 25

Employment

Decreasing

points from the previous month. Where employment levels fell, reports indicate that this was in line with decreasing workloads and efforts to reduce costs. Growth in wages continued in January, although at a slower rate, with the wages sub-index falling by 4.1 points to 54.5.

60 55 50 45

InpuT COSTS anD SEllInG prICES

95 90 85 75
Diffusion Index
Increasing

Input price inflation moderated in January. The input costs sub-index

45 40 35 30
Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13

Input Prices

Average Selling prices

auSTralIan pCI*
January 2013 auSTralIan pCI aCTIvITy - HouSES - APARTMENTS - CoMMERCIAl - ENGINEERING nEw OrDErS EMplOyMEnT DElIvErIES InpuT prICES SEllInG prICES waGES CapaCITy(%) 36.2 37.7 36.1 38.9 40.1 38.7 37.0 33.3 36.6 63.5 39.7 54.5 65.8 December 2012 38.8 39.6 34.7 40.1 46.2 38.5 42.6 34.0 37.5 68.8 36.0 58.6 67.3 Monthly Change -2.6 -1.9 +1.4 -1.2 -6.1 +0.2 -5.6 -0.7 -0.9 -5.3 +3.7 -4.1 -1.5 % points Direction Contracting Contracting Contracting Contracting Contracting Contracting Contracting Contracting Contracting Expanding Contracting Expanding Lower Rate of Change Faster Faster Slower Faster Faster Slower Faster Faster Faster Slower Slower Slower na Trend ** (Months) 32 33 32 33 31 13 32 32 30 89 27 46 na

*Results are based on a sample of approximately 150 companies. New monthly seasonal adjustment factors were applied in April 2012. ** Number of months moving in current direction

Supported by:
www.markiteconomics.com

Decreasing

registered 63.5, a decline of 5.3 points from the previous month. Selling prices declined for the 27th consecutive month, highlighting the strong competition for available work that persists across the industry. Despite the continued decline in selling prices, the rate of contraction eased in the month with the sub-index rising by 3.7 points to 39.7.

80 70 65 60 55 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 this publication.
*Prepared by Markit Economics
AIG12601

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