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Money Margin pressures are intensifying across Australia's construction sector

08:20  07 june  2018
08:20  07 june  2018 Source:   businessinsider.com.au

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Margin pressures across the sector continue to increase. Australia ’ s construction sector continues to strengthen, boosted by housing and engineering work. The Australian Industry Group’s (Ai Group) Performance of Construction Index (PCI) stood at 54.0 in May in seasonally adjusted terms

Australia ' s construction sector continues to strengthen, boosted by housing and engineering work. Apartment building continues to weaken Eight in 10 Sydneysiders think cost of living pressures have intensified over the past year and just one in five say they could find affordable housing in their local

Australia's construction sector continues to strengthen.© AAP Image Australia's construction sector continues to strengthen. Australia's construction sector continues to strengthen, boosted by housing and engineering work.

The Australian Industry Group’s (Ai Group) Performance of Construction Index (PCI) stood at 54.0 in May in seasonally adjusted terms, down 1.4 points from April.

The PCI measures perceived changes in activity levels across Australia’s construction sector from one month to the next. Anything above 50 signals that activity levels are improving while a reading below suggests they’re deteriorating. The distance away from 50 indicates how quickly activity levels are expanding or contracting.

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Activity across Australia ’ s housing and apartment construction sectors improved sharply last Despite boom-time like conditions, construction firms are reporting increased margin pressures . The PCI measures perceived changes in activity levels across Australia ’ s construction sector from

Margin pressures intensify for services firms, especially in energy costs. Retail sector records its fastest deterioration in activity levels since mid-2012. The PSI measures changes in activity levels across Australia ’ s services sector from one month to the next.

So at 54.0, activity levels still improved in May, just at a slower pace than April.

The Ai Group reports that activity levels have now improved in each of the past 16 months, the longest period of consecutive improvement in the 13-year history of the survey.

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The Ai Group said the improvement was driven by firmer activity levels for housing and engineering construction, offsetting a steep slowdown in commercial work and deterioration in apartment building.

"House building activity expanded at a stronger rate in line with firmer demand conditions and a solid backlog of work," it said.

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Australia ’ s construction sector lost a bit of momentum in December with activity levels improving at the slowest pace since April 2017, according to data from the Australian Industry Group (Ai Group). The group’s Performance of Construction Index (PCI) — a measure of activity levels across

Margin pressures for manufacturers intensified during the month as input costs rose faster than selling prices. This PMI measures perceived changes in activity levels across Australia ’ s manufacturing sector from one month to the next.

"Engineering construction also gained some further momentum in May consistent with reports of new tender wins and on-going support from a strong and expanding pipeline of publicly funded investment in major infrastructure works."

Fitting with a recent moderation in non-dwelling building approvals, the group said activity across commercial construction slowed noticeably during the month.

"The pace of growth in commercial construction was significantly slower in the month, although May was the sector’s 13th consecutive month of stable or expanding activity amid a range of projects underway, including offices, accommodation and education buildings," it said.

Again, mirroring recent trends in non-housing dwelling approvals, the Ai Group said apartment building continued to decline.

"Apartment building remained the weakest performing sub-sector in May with activity contracting for a third consecutive month, albeit at slower rate in comparison with April," it said.

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Activity levels across Australia ’ s manufacturing sector improved at the fastest pace on record in March This index measures perceived changes in activity levels across Australia ’ s manufacturing sector It added that “concerns about skill shortages and wage pressures are emerging in some

Activity levels across Australia ’ s manufacturing sector continued to improve in June, adding to the positive momentum enjoyed in the prior 20 months. The Australian Industry Group’s (Ai Group’s) Performance of Manufacturing Index (PMI) came in at 57.4 in seasonally adjusted terms, pulling back

This table from the Ai Group shows how each sub-sector fared in May, comparing the results to April as well as a year ago.

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Like the performance by sub-sector, individual activity subindexes also put in a mixed performance in May with new orders and employment growing at a slower pace while supplier deliveries accelerated.

"The industry’s on-going expansion was supported by continued rises in both activity and new orders," it said.

"This was associated with a stronger increase in deliveries from suppliers, although employment growth softened from the 3.5-year-high in April."

On new orders specifically, a lead indicator on activity levels in the future, the results suggest the recent divergence between housing and engineering construction compared to apartment and commercial building will likely persist in the months ahead.

"Slower growth in new orders was evident in the commercial sector while in the apartment building sector new orders contracted at a sharper rate," it said.

"In contrast, new orders expanded at a higher pace in the house building sector and eased only slightly for engineering construction businesses."

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Activity levels across Australia ' s construction sector contracted at a faster pace in February, bucking strength seen in the nation's manufacturing and services sectors during the month. The Ai Group-HAI performance of construction index slid 0.2 points to 46.1, leaving it at the lowest level seen since

Activity levels across Australia ’ s construction sector continue to strengthen The PCI measures perceived changes in activity levels across Australia ’ s construction sector from one month to the next. “Elevated cost pressures are being driven by robust demand for construction materials

Despite strong conditions across most parts of the industry, the Ai Group said margin pressures remained intense.

The input prices subindex surged by 8.1 points to 82.6 points, indicating that cost pressures in the construction of building projects lifted sharply during the month.

Like the headline PCI, the distance away from 50 indicates how quickly prices are increasing or decreasing over a given month.

In May, the answer was a lot.

"This increase in costs was driven by robust demand for construction materials, escalating energy input costs and supplier price hikes related to strength in commodity prices," the group said.

In contrast, the selling prices subindex increased by a smaller 2.7 points to 60.4 points, indicating that pressure on input prices are only partially being past on to buyers given strong levels of competition.

"The ongoing gap between these price series demonstrates that strong pressures on profit margins persist for businesses in the construction industry," the Ai Group said.

"This is consistent with reports of a highly competitive quoting and tendering environment."

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