House building and engineering construction were the major drivers of growth in August, the latter linked to the roll-out of various big-ticket infrastructure projects.
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) slipped by 5.2 points to 55.3 in August. The figure was down on July's record high but still indicates solid expansion; 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: "While there was some pull-back in the pace of growth, construction sector activity, employment and new orders all lifted again in August. Housing and engineering construction were the major sectoral contributors with activity in apartment building falling and commercial construction treading water after the dizzy heights reached in July. The near-term outlook for the overall construction sector remains healthy with new orders stronger other than for the apartment building sub-sector which saw a very steep fall. The very solid pipeline of infrastructure work is providing a major boost to the overall economy and is picking up at least some of the slack left by the retreat of mining-related investment.”
HIA senior economist Shane Garrett said: "August's Australian PCI contains mixed results for housing activity – growth continued on the detached-house side while apartments slipped backwards. HIA's latest forecasts envisage further large declines in new apartment building over the next few years. The more challenging conditions facing residential building in Australia were underlined by yesterday's GDP figures which revealed a second consecutive contraction in new dwelling construction activity during the June 2017 quarter. The downturn in new residential building is set to continue unfolding over the next couple of years.
House building was down 5.9 points to 56.5 and engineering construction rose 0.5 points to 58.0. Apartment building activity returned to negative territory (down 7.9 points to 44.7) while commercial construction was more subdued, declining by 14.1 points to a near-stable 50.2.
While down on July, construction activity (down 4.3 points to 54.0) and new orders (down 7.1 points to 57.5) continued to expand at relatively high rates in August. Sustained growth in aggregate industry demand led to a three-year high in expansion of deliveries from suppliers (up 0.5 points to 59.7).
The sub-indexes for input prices (down 3.1 points to 70.5) and wages (up 0.7 points to 65.3) remained elevated in August. The sub-index for selling prices fell slightly but remained in expansion (down 1.9 points to 57.2), suggesting costs are being passed on, but not broadly given strong market competition.