Australian Industry Group | Author
Published Jan 11, 2019 09:20
The PCI dropped 1.9 Points to 42.6 in December
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) dropped a further 1.9 points to 42.6 in December, indicating a fourth consecutive month of decline and the sharpest rate of contraction in five and a half years (readings below 50 indicate contraction in activity, with the distance from 50 indicating the strength of the decrease).
Ai Group Head of Policy, Peter Burn, said: "Sharp falls in residential building activity together with a further drop in commercial construction and a slight dip in engineering construction saw construction sector performance in December record its sharpest monthly contraction since mid-2013. Activity and new orders were down across the four sub-sectors with the apartment sub-sector continuing as the biggest drag on performance. With construction accounting for close to 10 percent of both GDP and employment, the downturn in this sector will weigh on the overall economy. That said, levels of construction activity remain respectable by historical standards with infrastructure work in particular likely to continue to account for a significant proportion of overall activity. Despite the falls in activity and new orders, employment held up well in December as constructors held onto their staff in the face of growing skill shortages," Dr Burn said.
HIA Acting Principal Economist, Geordan Murray, said: "The Australian PCI finished the year on a soft note with all sectors of the construction industry recording declining levels of activity. The interplay between falling home prices in the major housing markets on the east coast and the restrictive lending environment weighed heavily on residential building during the latter stages of 2018. The sub-indexes of the Australian PCI tracking activity in apartment and detached house building were both particularly weak in December, showing the sharpest rates of contraction since the beginning of the current cycle back in 2012. There is still a large volume of residential building work to be done on projects that are currently underway but as we progress through 2019 more of the existing projects will reach completion. The softening in Australian PCI new orders sub-indexes suggests that the completed projects are not likely to be backed up by new projects entering the pipeline. The volume of residential building activity is set to fall in 2019. Residential building won’t be the driver of economic growth that it has been over the last few years," Mr Murray said.
h2 Australian PCI – Key Findings for December:/h2
Seasonally adjusted |
Index this month |
Change from last month |
12 month average |
Trend |
Index this month |
Change from last month |
12 month average |
Australian PCI® |
42.6 |
-1.9 |
51.2 |
House building |
35.4 |
-2.6 |
48.7 |
Activity |
35.7 |
-5.9 |
50.0 |
Apartments |
26.3 |
-2.7 |
41.0 |
Employment |
49.4 |
5.1 |
51.7 |
Commercial |
45.0 |
-0.9 |
52.9 |
New Orders |
41.0 |
-4.8 |
50.9 |
Engineering |
48.3 |
-2.6 |
54.3 |
Supplier Deliveries |
48.4 |
0.5 |
53.4 |
||||
Input Prices |
72.0 |
-1.1 |
76.1 |
||||
Selling Prices |
40.6 |
-6.5 |
51.9 |
||||
Wages |
60.9 |
-0.7 |
62.9 |
Capacity Utilisation (% - seasonally adjusted) |
74.5 |
0.2 |
77.3 |
Results above 50 points indicate expansion. All indexes for sectors in the Australia PCI® are reported in trend terms (Henderson 13-month filter).
Background: The Ai Group/HIA 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.
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Written By: Australian Industry Group
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