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--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:
[TOPICS: MALDS$,M$A$$$,M$L$$$,MT$$$$]