Construction downfall points to economic downturn

Construction slump points to economic downturn


The Australian Production Congregation (AiG) - Housing Industry Association (HIA) Performance of Construction Index (PCI) reveals that building activity fell sharply in May, after very falling heavily in April.
The index now stands at a meagre 36.9 - well below the benchmark quantity of 50 that separates an expanding industry ï from: http://www.building-materials-china.com/ï from a contracting one.
This is the lowest result and the sharpest monthly fall in the index's two and a half year history.
The previous sharpest fall was the month before.
Chronology warp
These figures stand in stark contrast to Australian Office of Statistics (ABS) news released on Wednesday.
The official figures showed stronger than expected economic growth, with Gross Maid Product (GDP) expanding by 0.6 per cent, compared to a Reuters poll of economists on average forecasting 0.3 per cent growth.
However, the ABS figures were quarterly figures from the three months to March, whereas extra new data continues to show weakness in most major sectors of the economy, except those related to mining and energy.
The AiG's associate employer of economics (from: http://www.building-materials-china.com/buy-economics/) and research, Tony Pensabene, said: "Contrary to recent reports of the construction industry holding up, this meaningful indicator of the industry signals that higher interest rates, tighter liquidity, and lower confidence levels are having a broad based effect on activity.
"The results, which are up to three months ahead of authenticated data, fanfare that weakness in the industry has intensified, with reductions in continuance extending beyond bullpen building and apartments to commercial and engineering construction."
This conclusion is supported by fresh endorsed profit figures which showed an 18.1 per cent fall in seasonally adjusted construction profits for the quarter year to March.
Monthly ABS building approvals statistics have again showed a decisive shift lower, dropping 1.3 per cent in April in trend terms.
This was in spite of a 7.8 per cent rise in the seasonally adjusted figure for April, which was mainly attributable to large surge in the effervescent apartment sector, where a few exorbitant developments can skew the figures in any given month.
Retail sales acquire also declined in the months since the GDP info was collected, with a modest rise in March offset by an identical fall in April, leaving the trend growth in retail sales flat-lining at 0.0 per cent.
The retail (FROM: http://www.building-materials-china.com/buy-retail/ )figures are widely used as a expanded current indicator of the economy, because retail spending is repeatedly the cardinal area where consumers will intersect back when they feel the hip-pocket pinch.
The underlying question is which material to believe - the time-lagged, but comprehensive, authorized GDP figures, or augmented current private and official monthly indices operating on smaller samples (the PCI surveys 120 companies).
Big falls
Probably the greatest factor lending weight to the dire findings of some monthly surveys, such as the PCI, is the sheer scale of the declines.
Much allowing for potential deficiencies in the data, it is hard to think the index duration so far off the objective as to cast query on the result that interpretation is in the midst of a steep decline that began approximately the start of the year.
The other largely worrying findings of the index were that new orders had fallen sharply, and that construction
(FROM: http://www.building-materials-china.com/buy-construction/ )employment had fallen for the moment month in a row.
The late orders sub-index is at 36.1, which is the lowest result for incoming attempt in the PCI's history, causing concern for builders apt the considerable time lags between orders and completion in construction.
"Of concern, recent orders for the industry as a whole are now at their lowest level in almost three years, which mode that the happening weakness in career is possible to at the end during the months ahead," Mr Pensabene said.
The fall in office besides seems to demonstrate construction companies' belief that the decline is not a short-term aberration as they chop costs by cutting staff.
The report's authors have attributed the falls in growth to higher interest rates, bread bills and fuel (http://www.building-materials-china.com/buy-_fuel%2520/)costs impacting on consumer demand, as fit as the rising reward to industry of fuel and building materials, such as steel.
The HIA's chief economist Harley Valley said that these pressures are potential to shift more obvious in the abutting set of ABS figures for the Jun quarter.
"A delicate Trudge quarter for residential construction indicators will be compounded by an even softer June quarter," he said.
The Reserve Bank and expectant borrowers testament admit to wait until September 3 for the beside allot of detailed validated GDP figures to either confirm or refute the latest evidence of a slow down.

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