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Australian construction growth hits nine-year high

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World Cement,

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) increased by 4.1 points to 59.1 in September 2014, the industry's strongest pace of expansion in the nine years since the survey's inception (index readings above 50 points indicate an expansion in activity).

The upturn in construction industry conditions reflected expanding activity across three of the four sub-sectors, led by house building (61.7 points) and apartment building (60.5 points). Growth in commercial construction also picked up in September (up 3.0 points to 58.4), while engineering construction continued to contract but at a slower pace (up 4.6 points to 48.3). New orders (up 1.5 points to 57.2) and construction activity (stable at 57.1) continued to expand strongly in September, leading to the highest rates of increase in the survey's history of both employment (up 9.1 points to 62.8) and supplier deliveries (up 10.8 points to 60.9).

"Continuing strength in house and apartment building and a consolidation of improved conditions in commercial construction outshone a further, modest contraction in engineering construction in September,” said Peter Burn, Ai Group Director – Public Policy. “In positive signs for the remainder of the year, new orders were strong in the three expanding sub-sectors and employment grew very solidly. Wages growth accelerated across the sector suggesting that, despite flat overall conditions in the labour market and the easing of activity in engineering construction, skill shortages may be beginning to reappear.”

Harley Dale, HIA Chief Economist, commented: "The latest Australian PCI® is among a string of indicators signalling that the strong performance of the new residential construction sector should continue throughout 2014/15. The commercial construction sector finally appears to be following the lead of new residential construction, which is another pleasing outcome. It will be important for the broader economy that evidence of strong performance in residential and improving performance in commercial construction presents itself throughout 2014 and into next year. The current elevated focus and uncertainty around the potential implementation of restrictive lending practices, and sweeping generalisations on this subject, are not helpful to that evidence emerging.”

Adapted from press release by Rosalie Starling

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