Australian PCI shows continued construction decline

Australia’s construction industry continues to decline, a result of drops in activity and new orders. January 2012 was the 20th consecutive month that the sector has contracted.

The latest Australian Industry Group (Ai Group) Australian Performance of Construction Index (Australian PCI), in conjunction with the Housing Industry Association, reveals that the seasonally adjusted index fell by 1.2 points to 39.8. Any reading below 50 indicates a contraction in activity.

Hardest hit were the commercial and apartment building sectors, with indexes of 30.4 and 34.6 respectively. The house building sector fared better with an index of 41.1. This is apparently due to interest rate cuts in November and December 2011 improving customer enquiries and activity. Engineering construction continues to be the overall best performing sector with an index of 47.8 - despite a negative activity reading in January. Resource-related projects have kept engineering construction stronger than other sectors.

Tight credit unions, a lack of new tender opportunities and strong competition for existing work were blamed for the industry’s continued weakness.

The Australian PCI showed a steep decline in new orders, reflecting overall industry weakness. The new orders sub-index dropped 6.6 points to 35.9. The construction activity sub-index echoed this, declining by 3.4 points to 37.0.

View the entire Australian PCI report at http://www.aigroup.com.au/portal/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/LIVE_CONTENT/Economic%2520Indicators/PCI/2012/PCI_jan_report_FINAL.pdf.