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News » International » Australian construction continues to expand » published 7 Dec 2017

Australian construction continues to expand

Momentum built in the Australian construction industry in November with the 10th consecutive month of expansion.

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) climbed 4.3 points to 57.5. 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: "Activity in the construction sector which has been expanding for most of the year accelerated further in November as higher activity levels in both engineering construction and house building were backed up by a surge in commercial construction. The well-established trend decline in apartment building continued as this sub-sector scaled back from the very high levels of recent years.”

He added that the sub-indexes in the Australian PCI point to strong employment growth - November was the seventh consecutive month of expansion -  and provide further evidence of a steady pick-up in wages. “With new orders also in positive territory, the sector looks like closing 2017 on a high," he Burn.

HIA senior economist Shane Garrett said: "With interest rates set to remain at record lows for longer than expected, the short-term outlook for new home building is stronger and today's Australian PCI® result for detached house building is evidence of this. Low interest rates and unprecedented migration from overseas are the two most important reasons why new home building reached the highest level on record last year. Looking further ahead, other factors – including regulatory restrictions – will force new home building to move lower over the next couple of years. The reduction will be most visible on the apartment side of the market.

Across the four construction sub-sectors, engineering construction remained the strongest performer, recording an 11.5-year high (up 3.2 points to 64.1) on the back of rising momentum in the roll-out of major infrastructure projects. House building activity also strengthened due to continuing firm demand and support from a solid backlog of work (up 8.2 points to 61.3).

The rate of expansion in commercial construction lifted to its second highest level in 3.5 years (up 9.7 points to 59.8), while apartment building contracted for a fourth consecutive month (up 0.9 points to 47.7).

Overall construction activity accelerated to its strongest pace in the survey's 12-year history (up 7.9 points to 60.8). This was associated with stronger expansions in new orders (up 3.1 points to 56.7), deliveries from suppliers (up 2.2 points to 56.4) and employment (up 2.9 points to 55.3).

The input prices (up 3.8 points to 78.8) and wages (up 2.4 points to 62.3) sub-indexes remained elevated in November. The selling prices sub-index increased by 6.3 points to 59.9, suggesting that rising costs are being passed on, but not broadly given strong market competition.

 

MPU

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This article was published on 7 Dec 2017 (last updated on 7 Dec 2017).

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