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Australia’s construction sector continued to grow in August

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World Cement,

According to the latest Australian Industry Group/Housing Industry Association Australian PCI®, the construction sector continued to grow and rebalance in August 2014. The Australian PCI® grew for a third consecutive month in August, rising by 2.4 points to 55.0 (readings above 50 indicate an expansion in activity).

During the month, activity continued to shift away from engineering construction to growth driven by residential and commercial construction. Apartment building performed well in August, rising by 13.0 points to 64.9. Commercial construction expanded for a second month, but at a slower rate (falling by 5.8 points to 55.4), while house building increased by 7.7 points to 60.9. The engineering construction sub-index decreased by a further 3.5 points to 43.7 due to factors such as a fall in resource-related construction activity and government infrastructure projects.

"The construction industry is continuing to rebalance away from the large projects that have lifted mining and minerals export capacity and towards the residential and commercial construction sub-sectors,” said Peter Burn, Australian Industry Group Director. “The combination of low interest rates and strong gains in asset values is underwriting continued strength of apartment and house building. A more tentative recovery of commercial construction continued in August following a mid-year pause. With new orders in these three sub-sectors also on the up, the near-term outlook is for continued growth and, with further contraction of engineering construction expected, ongoing rebalancing within the overall construction sector."

Housing Industry Association Economist, Diwa Hopkins, also commented on the results: "The residential construction components of the Australian PCI® have been key to the overall index trending higher and ultimately into expansionary territory. It’s encouraging to now be observing firmer signs of improvement from commercial construction – in terms of both current activity as well as the pipeline of future work. These improved conditions have flowed through to employment, with the construction employment index indicating a second consecutive month of growth. The labour market has been a key area of weakness in the wider economy. The labour-intensive nature of construction means that growth in this sector and the associated job creation can make a significant contribution to improving broader labour market outcomes."

Adapted from press release by Rosalie Starling

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