Construction slump points to economic downturn

The Australian Industry Group（http://www.building-materials-china.com/） (AiG) - Housing Industry Association (HIA) Performance of Construction Index (PCI) reveals that building activity fell sharply in May, after also falling heavily in April. The index now stands at a paltry 36.9 - well below the benchmark number of 50 that separates an expanding industry from a contracting one. This is the lowest result and the sharpest monthly fall in the index's two and a half year history. The previous sharpest fall was the month before. Time warp These figures stand in stark contrast to Australian Bureau of Statistics (ABS) data released on Wednesday. The official figures showed stronger than expected economic growth, with Gross Domestic Product (GDP) expanding by 0.6 per cent, compared to a Reuters poll of economists on average forecasting 0.3 per cent growth. However, the ABS figures were quarterly figures from the three months to March, whereas more recent data continues to show weakness in most major sectors of the economy, except those related to mining and energy. The AiG's（http://www.building-materials-china.com/） associate director of economics and research, Tony Pensabene, said: 'Contrary to recent reports of the construction industry holding up, this leading indicator of the industry signals that higher interest rates, tighter liquidity, and lower confidence levels are having a broad based impact on activity. 'The results, which are up to three months ahead of official data, show that weakness in the industry has intensified, with reductions in activity extending beyond house building and apartments to commercial and engineering construction.' This conclusion is supported by recent official profit figures which showed an 18.1 per cent fall in seasonally adjusted construction profits for the quarter year to March. Monthly ABS building approvals statistics have also showed a decisive shift lower, dropping 1.3 per cent in April in trend terms. This was despite a 7.8 per cent rise in the seasonally adjusted figure for April, which was mainly attributable to large surge in the volatile apartment sector, where a few large developments can skew the figures in any given month.