Construction Hits 3 ½ Year High

Sourceable Industry News & Analysis

The construction industry in Australia recorded its slowest pace of decline in almost three and a half years last month, according to the latest report.

Driven by a strong improvement in housing and apartment building, the Australian Performance of Construction Index (Australian PCI®) lifted 3.9 points to come in at 47.6 – the highest reading on record since the middle of 2010.

This means whilst industry conditions are still deteriorating (any reading below 50.0 indicates an overall decline in conditions), the pace of that deterioration was slower than at any other time in nearly three and a half years.

The results came as growth in new orders drove the first expansion in activity on record in more than forty months, with activity in apartment and multi-residential construction rising for the first time since May 2010 and housing construction increased for only the second month ion record since the middle of that year.

Key Findings

Australian Industry Group Chief Economist Julie Toth welcomed the latest data, saying there are grounds for ‘cautious optimism’ over coming months notwithstanding continuing challenges associated with tight credit conditions and low levels of public sector building activity.

“The construction sector is closer to stabilisation than at any time since mid-2010” Toth says. “The housing and apartment sectors are driving the industry’s improved performance on the back of lower interest rates and a lift in buyer sentiment. Meanwhile, declines in both commercial and engineering construction moderated in the month.”

Housing Industry Association Chief Economist Harley Dale, meanwhile, says the improvements in the housing and apartment building sectors as well as those in new orders are ‘very encouraging’ , and that it is hopeful recent gains will prove to be sustainable and translate into a broader recovery.

sector activity

Key points:

  • The latest seasonally adjusted Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) lifted 3.9 points to 47.6 (readings below 50 indicate a contraction in activity) – the highest reading in almost three and a half years.
  • Across the sub-sectors, house building recorded its strongest reading since May 2010 (61.5) while apartment construction (57.7) ended 40 months of declining activity. The rate of decline in commercial construction (43.7) moderated while engineering construction (49.0) was close to stabilising in the month.
  • The new orders sub-index registered 50.8, its first rise since May 2010.
  • Employment (down 4.0 points to 40.6) continued to decline.
  • Profit margin pressure remains as input prices (67.3) continue to rise and selling prices (41.9), albeit with both the increase in costs and the decline in prices having moderated.