Construction maintains growth

The national construction industry expanded for an eighth consecutive month in September 2017, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) slipping slightly by 0.6 points to 54.7 (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase).

Ai Group Head of Policy, Peter Burn, said: “September 2017 saw a continuation of the healthy levels of overall construction activity that have prevailed for most of 2017 to date. While apartment building is winding down and commercial construction was flat, both engineering construction and house building continued to grow relatively strongly in September 2017. Construction sector employment lifted again and wages growth accelerated in September 2017. With new orders still on the rise for the sector as a whole, the outlook over the next few months is positive even though the indications are for further contraction in the apartment sub-sector,” Dr Burn said.

HIA Senior Economist, Shane Garrett, said: “New apartment building has grown to unprecedented highs over the past five years and it is inevitable that we would see a retreat from these levels. The Australian PCI® – which shows the lowest reading in almost a year – indicates a slowdown in apartment construction is now evident. Residential building has been cooling from record highs and is set to decline over the next couple of years so the expansion of detached house building market in September 2017 is a welcome reprieve,” Mr Garrett said.

Australian PCI® – Key Findings for September 2017:

  • House building (up 0.1 points to 56.6) and engineering construction (down 1.1 points to 56.9) continued to drive industry growth.
  • Commercial construction activity remained stable in September 2017 (up 0.1 point to 50.3), while apartment building activity dropped further into negative territory (down 3.3 points to 41.4).
  • While down on August, the construction activity (down 1.4 points to 52.6) and new orders (down 4.2 points to 53.3) sub-indexes continued to expand in September 2017, while deliveries from suppliers expanded at their highest rate in three years (up 1.1 points to 60.8).
  • Businesses also lifted their workforces, with the employment sub-index rising 3.9 points to 55.4.
  • The input prices (up 2.0 points to 72.5) and wages (up 1.5 points to 66.8) sub-indexes remained elevated in September 2017. The selling prices sub-index increased by 2.4 points to 59.6, suggesting that rising costs are being passed on, but not broadly given strong market competition.

Background: The Ai Group/HIA Australian PCI® is a seasonally adjusted national composite index based on the diffusion indexes for activity, orders/new business, deliveries and employment with varying weights. An Australian PCI® reading above 50 points indicates that construction activity is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline.

Source: Ai Group

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