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Construction ends 2016 in the red: Australian PCI®

19 January, 2017

The national construction industry declined for a third consecutive month in December.

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) remaining relatively unchanged at 47.0 points (readings below 50 indicate contraction in activity, with the distance from 50 indicating the strength of the decrease).

The national construction industry declined for a third consecutive month in December, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) remaining relatively unchanged at 47.0 points (readings below 50 indicate contraction in activity, with the distance from 50 indicating the strength of the decrease).

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Ai Group Head of Policy, Peter Burn, said: "The construction sector closed out 2016 with a third straight month of contracting conditions. Activity, new orders and employment were all down on the previous month and activity in each of the four sub-sectors shrank in December. While levels of apartment building remain well above average, the furious pace of a year ago clearly eased through 2016. The engineering construction sector continues to be dominated by the drop in mining-related activity which is overshadowing a lift in transport infrastructure in the south-east corner of the country. Conditions were also weak in the commercial construction sector in the closing months of 2016. The lower level of new orders suggests we cannot expect a sustained turnaround over the first few months of 2017," Dr Burn said.

HIA Senior Economist, Shane Garrett, added: "Both house and apartment building activity contracted again during the final month of 2016, although the pace of decline has slowed on the apartment side of the market. During 2017, we expect new dwelling starts to decline although the carry over from homes commenced last year means that activity on the ground will remain elevated for much of the year ahead," Garrett concluded.

Australian PCI® – Key Findings for December:

  • The Australian PCI® increased by 0.4 points to 47.0 in December to remain in contraction.
  • The activity sub-index of the Australian PCI® remained in contraction, if at a slower rate (up 2.8 points to 47.7), while new orders fell for a fifth month (up 0.2 points to 48.6). Employment (down 1.9 points to 43.5) fell at its most pronounced rate in nine months.
  • All four sectors of the Australian PCI® contracted in December. Apartment building declined for a fourth straight month, albeit at a slower rate (up 1.4 points to 46.1), while house building spent a fifth month in negative territory (down 1.6 points to 45.6). Engineering construction contracted for a third month but regained some ground towards stability (up 7.4 points to 48.8) while commercial construction also remained in negative territory for a fourth month (down 0.9 points to 47.8).
  • Growth in the wages sub-index continued in December (up 0.3 points to 59.8), while input prices lifted a further 5.7 points to 70.9. The selling prices sub-index declined by 3.3 points to 52.7 to remain in expansion, suggesting the pressure on input prices and wages is being passed on (if only marginally).

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