Latest data on construction activity may create need for business finance support
The August construction activity report reveals another drop in some sectors which may create a need for some operators to require business finance support.
The data reveals variations in some sectors that may indicate varying prospects for different operators. Prospects which may require either general finance to support the business or asset acquisition finance to support growth.
The Ai Group reports the construction activity and the August results show a third month of contraction. However, the rate of that contraction is lower than for the previous month. In addition there are increases in new orders in some areas of the market.
For business owners that refer to these reports for forecasts and possible indicators for their planning purposes, the August report may have mixed outcomes. Those operating in sectors which have continued to show a fall may seek support by way of restructuring existing loans through refinancing and other solutions.
Those in sectors that reveal a level of improvement may see this as the ideal time to invest in new machinery and equipment with equipment finance. While these requirements differ in purpose and motivation, the message from Business Finance to all is the same. Interest rates are set to be increased again at the RBA’s
October meeting. So there is a need for speed in securing new business finance solutions before these further rises.
The amount of the October RBA increase is uncertain at this time. In addressing the House of Representatives committee on economics last week, Governor Lowe said the October decisions may be for a further 50 basis points increase or a smaller 25 basis points. There was no mention of no rise.
Timing taking on new finance, whether it be for business support of for new equipment acquisitions can be a challenging decision making process. Ensuring the time is ideal in regard to operations and work flow as well as the lending markets. Referring to the information in the construction activity reports may assist with gauging prospects for future work flow and making such decisions.
August Ai Group Report
The Performance of Construction Index
is collated and reported through the Ai Group and HIA. The regular reports cover activities and performance in a number of key construction industry sectors. These include commercial construction, apartment building, house building and engineering construction.
Major points in August report:-
- The August results show a contraction for the third month.
- The rate of the drop for August was not as great as that recorded for July.
- The engineering and the commercial sectors showed improved activity.
- The apartments, home and commercial sectors contracted.
- August was the 4th month of contraction in the housing segment.
- Apartments moved from its rating of stability to contraction as activity dropped.
- A positive was recorded in the engineering sector. This sector is seen as improving and growing.
- Demand pressures emanating from interest rate rises were mentioned which resulted in lower customer demand.
- Supply was impacted by constraints affected the industry including tightness in the labour market and increasing costs of supplies and materials. These are seen as inhibitors for the sector.
- Capacity utilization recorded a slight increase. This particular indicator has been at an elevated level going back to the start of 2021.
- A rise in new orders was noted. This follows 2 months of contractions. Figures are seasonally adjusted.
- New orders were strongest in apartments and in engineering.
- There was a reduction in demand for house building. Rising interest rates and uncertainties regarding the future outlook given as contributors to this reduction.
This report may provide insights in regard to general industry direction to assist businesses to develop plans around growth, financial decisions and investments in new machinery. These plans will vary as we mentioned at the outset and Business Finance Australia offer a range of finance products which may provide support and solutions for the differing scenarios.
Finance to Support Businesses
The multiple months of construction activity contraction may be taken by some operators as a sign to shore-up their financial situation and be proactive to prevent possible cash flow pressures. Pressures which may arise if a fall-off in work is experienced.
We provide a number of options for consideration in these circumstances.
A Business Overdraft Facility
may suit businesses seeking a flexible option where interest is only payable on the amount of funding utilized.
both Secured and Unsecured can provide more long-term support and stability to a business moving forward.
The interest rates
on these finance solutions do vary and our consultants will discuss the various options and how each may meet and address individual requirements.
Finance to Invest in New Equipment
Those operating in sectors where upticks in activity are emerging may take the opportunity to acquire new machinery at this time. It is timely with interest rates set to be increased again in coming weeks. Getting in now before that rise may result in a significant saving on the overall amount of interest on equipment loans.
Options for new equipment finance include Lease, Rent to Buy, Commercial Hire Purchase and Chattel Mortgage. Chattel Mortgage is extremely popular at the moment with the added advantage of being suited to temporary full expensing.
Contact Business Finance on 1300 000 033 to discuss finance solutions to support the achievement of business objectives.
DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.