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Australian PCI®: Construction industry stays close to historic high in April 2021

Australian PCI®

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) fell by 2.7 points to 59.1 in April 2021, continuing to indicate a strong pace of post-2020 recovery in the wake of March’s record high (readings above 50 indicate expansion in activity, with higher results indicating a faster expansion).

All four components of activity expanded strongly in April 2021, with the activity index reaching a record high of 62.8 points as home builders nationwide scrambled to commence new projects ahead of the HomeBuilder grant deadlines.

Ai Group Head of Policy, Peter Burn, said: “Australia’s construction sector continued to power ahead in April led by house building and engineering construction. Across the industry, employment and new orders were both higher in April although their expansion was slower this month. Apartment building and commercial construction were again in positive territory although with current growth coming after long periods of contraction, the levels of activity remain relatively modest. New orders were strong once again on the back of the house building and engineering construction sectors, suggesting continuing healthy levels of activity in the months ahead,” Dr Burn said.

HIA Economist, Tom Devitt, said: “The uptake of HomeBuilder has beaten all expectations. The extension of HomeBuilder’s commencement deadlines means builders will be able to meet much more of this record demand over the coming year and fewer homebuyers will have to suffer the disappointment of cancellation due to capacity constraints. This will support home building activity for several years before the current absence of population growth spreads from the apartment sector to the rest of the housing market,” Mr Devitt said.

Australian PCI® – Key Findings for April 2021:

  • All four sectors in the Australian PCI® remained expansionary in trend terms in April (2021), with house building (up 0.2 point to 69.7) and engineering construction (up 2.3 points to 63.8) continuing to lead the way.
  • The Australian PCI® activity index jumped 5.1 points to a record high of 62.8 in April 2021 amid a pre-deadline HomeBuilder scramble. The new orders index remained elevated despite dropping from March’s record high (down 7.7 points to 57.0), having peaked in Q1 of 2021 in reflection of HomeBuilder’s success.
  • The input prices index is still showing strong upward pressure but has eased from recent peaks (down 0.4 points to 92.5), while the selling prices index moved 1.5 points higher to 73.3 – a record high for this series, which commenced in 2008. This indicates that more builders are passing on their cost increases to their customers.
  • The employment index fell by 3.9 points to 59.2 after hitting a record high in March while the average wages index also remains elevated despite easing in April 2021 (down 6.4 points to 65.4). Capacity utilisation inched up again (up 0.1 percentage point to 81.4%), with many home builders reporting shortages of skilled labour.

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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