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