Construction industry to contract 4% over next three months and no improvement long-term: BCI

The construction industry is forecast to contract 4% over the three months to May 2013, according to short-term forecasts from the BCI Media Group.

BCI is forecasting $15.6 billion in total construction starts over the three-month period compared with $16.2 billion in the previous three-month period from December to February.

Total building construction is expected to fall 10% over this period with a 20% decline in the value of residential construction (including aged care accommodation).

The longer-term trend shows an 11% pick-up in residential construction for the May quarter of 2013 compared with the May quarter 0f 2012.

constructionmarch13chart

Commercial construction activity is expected to pick-up by 80% over the May 2013 quarter in line with longer-term growth, up 27% year-on-year.

The fall in total construction starts is being driven by a sharper fall in the infrastructure sector as the government cuts back on spending.

The long-term trend shows total construction starts in Australia at negative 3% when contrasting the value of 12 months’ construction starts against the corresponding 12- month period a year earlier.

BCI says there is unlikely to be any major improvement in the construction sector over the next twelve months as the high Australian Dollar, tight company budgets, and tough bank lending criteria continue to squeeze the market.

Whilst there are some signs of activity in the commercial and residential sectors, the overall building construction market continues to track sideways. On a state level, growth is showing through in New South Wales and Queensland; although in Queensland’s case any optimism needs to be tempered as the market remains nearly twenty per cent below where it was three years ago.

The fall in civil construction starts continued to gather speed.

"While there is anecdotal evidence of a drop in pricing on new jobs in the market, it remains to be seen if this will lead to a pick up in jobs going forward," says Damian Eastman, COO of BCI Media Group.

The Australian Industry Group/HIA Australian Performance of Construction Index for February recorded an expansion in house building and engineering construction with the overall index increasing by 9.4 points to 45.6  in the month, to still remain in contractionary mode, but at a slower rate of decline.

A reading of below 50 indicate a contraction in the industry with the distance from 50 indicative of the strength of the decline.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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