MNI 5 Things: Australia Construction Expands But Pace Slows

--Residential Construction, Mainly Apartments, Becoming A Drag

By Sophia Rodrigues

     SYDNEY (MNI) - The performance of construction index for June was published

by AI Group/Housing Industry Association on Friday. Below are the five key

observations we made from the survey: 

     --The construction industry expanded for 17 straight months but at the

slowest pace during this period, down 3.4 points to 50.6. The expansion is

mainly supported by commercial and engineering construction, with the apartment

building side now a drag and house-building just holding up. 

     --Capacity utilization and employment -- the two main indicators which

suggested pressure on the industry to invest and hire -- eased further in May,

with employment dropping 3.3 points to slip into contraction (48.2). Capacity

utilization fell 4.2 percentage points to 71.3%

     --The wages sub-index fell 6.2 points to 60.7 to drop below the 12-month

average of 63.7 points. Input prices retreated from a five-month high recorded

in May but remained elevated while selling prices fell 6.9 points to 53.5. The

gap suggests the pressure on input prices from rises in wages and other input

costs are being passed on in part, although not broadly given strong market

competition and a low inflationary environment. 

     --New orders fell 5.2 points to drop to contraction territory, driven

mainly by a sharp fall in house-building orders. Still, the weakest was

apartment-building orders which fell deeply into contraction to a 19-month low.

Commercial new orders rose 6.1 points to 51.1 and engineering orders fell 2.7

points to 52.1

     --Engineering construction saw 15th month of expansion amid on-going

support from a strong and expanding pipeline of publicly funded investment in

major infrastructure works. Commercial construction was the strongest performing

area of activity overall with its rate of growth lifting slightly in June due to

a range of projects in planning or underway including industrial, accommodation

and education buildings.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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