Construction declines further in May

(Australian Associated Press)


Construction activity retreated further in May following COVID-19 social restrictions and related declines in spending and investment.

The Ai Group and Housing Industry Association Performance of Construction Index (PCI) rose 3.3 points to 24.9 points in May, following a plunge to record lows in April, and was the 21st straight month of contraction for the industry.

A reading below 50 indicates contraction in activity, with lower results indicating a faster contraction.

All activity and sector indices remained firmly negative in May, with the overall construction activity index up 3.3 points to just 21.3.

Among the four construction sectors, housing was up 5.4 points to 20.2, apartments up 8.7 points to 21.6, while commercial construction rose 6.4 points to 18.1. However, engineering construction fell to a record low, down 2.3 points to 23.8.

The indices for input prices was down 0.6 points to 64.7 and selling prices was up 2.2 points to 28.4, both recovering a touch from the lows seen in April. Prices fell across all sectors as competition intensified for remaining larger projects.

“Activity and employment remained very low and new orders were barely at a trickle. Selling prices are depressed and with input prices still rising, builders are operating both at low volumes and at very skinny margins,” Ai Group head of policy Peter Burn said.

He said there were very few signs of a rebound and governments would need to be ready to extend existing fiscal measures and further commit to infrastructure projects.

The average wages index rose 3.3 points to 47.0 and employment index was up 3.5 points to 29.1, partly recovering in May after steep falls in April, likely on the back of the government’s JobKeeper wage subsidy scheme providing support for employment in the construction industry.

This was also underlined by capacity utilisation index recovered to 70.2 per cent in May, from a record low of 60.5 in April.

The new orders index was up 7.3 points to 23.0.

“Home building will continue to contract even as the economy opens up again,” HIA chief economist Tim Reardon said.

“The lags involved in the housing industry between sale and construction will see the contraction of building work accelerate downwards in the second half of the year.”


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