| Construction slump points to economic | | | | |
| downturn | | | | Retail sales have also declined in the months |
| | | | since the GDP data was collected, with a |
| The Australian Industry Group (AiG) - Housing | | | | modest rise in March offset by an equal fall |
| Industry Association (HIA) Performance of | | | | in April, leaving the trend growth in retail |
| Construction Index (PCI) reveals that | | | | sales flat-lining at 0.0 per cent. |
| building activity fell sharply in May, after | | | | |
| also falling heavily in April. | | | | The retail (FROM: )figures are widely used |
| | | | as a more current indicator of the economy, |
| The index now stands at a paltry 36.9 - well | | | | because retail spending is often the first |
| below the benchmark number of 50 that | | | | area where consumers will cut back when they |
| separates an expanding industry （from: | | | | feel the hip-pocket pinch. |
| from a contracting one. | | | | |
| | | | The underlying question is which data to |
| This is the lowest result and the sharpest | | | | believe - the time-lagged, but comprehensive, |
| monthly fall in the index's two and a half | | | | official GDP figures, or more current private |
| year history. | | | | and official monthly indices operating on |
| | | | smaller samples (the PCI surveys 120 |
| The previous sharpest fall was the month | | | | companies). |
| before. | | | | |
| | | | Big falls |
| Time warp | | | | |
| | | | Probably the greatest factor lending weight |
| These figures stand in stark contrast to | | | | to the dire findings of some monthly surveys, |
| Australian Bureau of Statistics (ABS) data | | | | such as the PCI, is the sheer scale of the |
| released on Wednesday. | | | | declines. |
| | | | |
| The official figures showed stronger than | | | | Even allowing for possible deficiencies in |
| expected economic growth, with Gross Domestic | | | | the data, it is hard to imagine the index |
| Product (GDP) expanding by 0.6 per cent, | | | | being so far off the mark as to cast doubt on |
| compared to a Reuters poll of economists on | | | | the conclusion that construction is in the |
| average forecasting 0.3 per cent growth. | | | | midst of a steep decline that began around |
| | | | the start of the year. |
| However, the ABS figures were quarterly | | | | |
| figures from the three months to March, | | | | The other particularly worrying findings of |
| whereas more recent data continues to show | | | | the index were that new orders had fallen |
| weakness in most major sectors of the | | | | sharply, and that construction |
| economy, except those related to mining and | | | | |
| energy. | | | | (FROM: )employment had fallen for the second |
| | | | month in a row. |
| The AiG's associate director of economics | | | | |
| (from: and research, Tony Pensabene, said: | | | | The new orders sub-index is at 36.1, which is |
| "Contrary to recent reports of the | | | | the lowest result for incoming work in the |
| construction industry holding up, this | | | | PCI's history, causing concern for builders |
| leading indicator of the industry signals | | | | given the considerable time lags between |
| that higher interest rates, tighter | | | | orders and completion in construction. |
| liquidity, and lower confidence levels are | | | | |
| having a broad based impact on activity. | | | | "Of concern, new orders for the industry as a |
| | | | whole are now at their lowest level in almost |
| "The results, which are up to three months | | | | three years, which means that the current |
| ahead of official data, show that weakness in | | | | weakness in activity is likely to persist |
| the industry has intensified, with reductions | | | | during the months ahead," Mr Pensabene said. |
| in activity extending beyond house building | | | | |
| and apartments to commercial and engineering | | | | The fall in employment also seems to indicate |
| construction." | | | | construction companies' belief that the |
| | | | decline is not a short-term aberration as |
| This conclusion is supported by recent | | | | they reduce costs by cutting staff. |
| official profit figures which showed an 18.1 | | | | |
| per cent fall in seasonally adjusted | | | | The report's authors have attributed the |
| construction profits for the quarter year to | | | | falls in activity to higher interest rates, |
| March. | | | | food bills and fuel ( impacting on consumer |
| | | | demand, as well as the rising cost to |
| Monthly ABS building approvals statistics | | | | industry of fuel and building materials, such |
| have also showed a decisive shift lower, | | | | as steel. |
| dropping 1.3 per cent in April in trend | | | | |
| terms. | | | | The HIA's chief economist Harley Dale said |
| | | | that these pressures are likely to become |
| This was despite a 7.8 per cent rise in the | | | | more apparent in the next set of ABS figures |
| seasonally adjusted figure for April, which | | | | for the June quarter. |
| was mainly attributable to large surge in the | | | | |
| volatile apartment sector, where a few large | | | | "A weak March quarter for residential |
| developments can skew the figures in any | | | | construction indicators will be compounded by |
| given month. | | | | an even softer June quarter," he said. |