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News » International » Australian construction reports growth » published 8 May 2017

Australian construction reports growth

Australia’s construction industry reported a third consecutive month of growth in April, though commercial building work continued to decline.

The Australian Performance of Construction Index (Australian PCI) increased by 0.7 points to 51.9. Rreadings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase. The figures, which are produced by the Australian Industry Group (Ai)/Housing Industry Association, signalled industry-wide growth.

The new orders sub-index of the Australian PCI returned to growth in April (up 4.4 points to 51.9) after falling to a five-month low in March. Deliveries from suppliers also lifted solidly to register the strongest rate of expansion since October 2014 (up 6.0 points to 58.0).  

Across the four construction sub-sectors, apartment building recorded a strong resurgence in April, increasing for the first time in eight months (up 11.7 points to 55.3). House building expanded for a fourth month, if at a significantly slower pace (down 8.3 points to 53.0). Commercial construction remained subdued (down 5.6 points to 43.2 – its steepest rate of contraction in six months) while engineering construction returned to expansion on the back of higher levels of non-mining infrastructure work (up 71.1 points to 55.6).

Ai group head of policy Peter Burn, said: "April saw a modest lift and more balanced performance for the Australian construction sector. In contrast to the previous month when house building was the only improving sub-sector, in April further – though less spectacular – growth in stand-alone residential dwellings was backed by a steep bounce in apartment building and a rebound in engineering construction. Commercial construction again detracted from sector-wide performance with its steepest contraction in six months. April was the third straight month of overall expansion for the construction sector with the near-term outlook bolstered by growth in new orders – particularly in the house-building sub-sector. Both activity and new orders improved in the engineering construction sector in April as the declining impact of the wind-down in mining-related projects was outweighed by growth in transport infrastructure work.”

HIA senior economist Shane Garrett added: "The Australian PCI results for April showing expansion in both segments of residential building during the month indicate that conditions in the housing industry are still solid. The latest figures indicate that apartment building activity recorded growth in April for the first month since July 2016 and that house building saw its fourth consecutive month of increase. The longevity of the current home building upturn in Australia is being sustained by the environment of very low interest rates and continued gains in employment. Delivering a sufficient supply of new dwelling stock over the long run is vital to Australia's future prosperity and we look forward to positive proposals in next week's Federal Budget with respect to unlocking more affordable housing solutions.”

Pressure from rising wages (down 0.8 points to 63.6) and input prices (up 1.5 points to 76.0) is partially being passed on, with the selling prices sub-index expanding further in April (up 2.9 points to 58.5), but profit margins remain under pressure amid a highly competitive tender pricing environment.

 

MPU

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This article was published on 8 May 2017 (last updated on 8 May 2017).

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