REPEAT: MNI: Australia Construction Up, Pressure on Capacity

Repeats Story Initially Transmitted at 22:39 GMT Feb 6/17:39 EST Feb 6

--AI/HIA Construction Index Expands for 12th Straight Month

By Sophia Rodrigues

     SYDNEY (MNI) - Australia's construction industry expanded for the twelfth

straight month and capacity utilization rose to a record high, and together with

rising employment and wage growth, pointed to diminishing spare capacity in the

sector.

     The data gives cause for optimism for the Reserve Bank of Australia which

is hoping for inflation to accelerate towards the mid-point of the 2% to 3%

target band as spare capacity slowly erodes and leads to rise in wage growth.

     But an offset to any such optimism would be continued pressures on profit

margins in the industry due to a highly competitive quoting and tendering

environment, that is limiting the ability of businesses to pass on rising costs.

     Data published by the Australian Industry Group/Housing Industry

Association Wednesday showed the performance of construction index rose by 1.5

points to 54.3 mainly due to rise in employment and new orders.

     Overall activity, however, declined slightly as a rise in

apartment-building sector was offset by declines in house-building and

engineering.

     New orders rose strongly for apartment-building, up 13.5 to 55.5 points.

However, it contracted for engineering construction as businesses find new

orders harder to secure. Still, the sector is expected to remain supported by

strength in new orders in 2017 from a solid pipeline of publicly funded

infrastructure.

     Employment sub-index expanded for the ninth straight month and wages

sub-index rose 0.4 points to 64.3. This was higher than the 12-month average of

63.4 points.

     From AI Group/Housing Industry Association Performance of Construction

Index (Australian PCI) for January published Wednesday.

                          January  Change from Previous Month

-------------------------------------------------------------

Australian PCI               54.3                        +1.5

Activity - Overall           54.5                        -0.1

Activity - Houses            52.0                        -2.5

Activity - Apartments        50.7                         0.0

Activity - Commercial        58.9                        +7.4

Activity - Engineering       53.5                        -3.4

New Orders                   51.8                        +2.6

Employment                   58.0                        +3.3

Deliveries                   52.9                        -0.5

Input Prices                 74.4                        -8.3

Wages                        64.3                        +0.4

Selling Prices               58.9                        +0.3

Capacity Utilization (%)     83.4                        +6.5

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

[TOPICS: MTABLE]