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Continued expansion in the Australian construction sector

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World Cement,

According to data from the Australian Industry Group, the national construction industry continued to expand in July 2014. The latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) stood at 52.6 (rising by 0.8 points). The 50-point level separates expansion from contraction.

Three of the country’s four construction industry subsectors recorded growth during the reporting period:

  • Commercial construction was up 11.4 points to 61.2 (the highest level in over six years).
  • Apartment building increased by 2.7 points to 51.9.
  • House building was down 3.4 points to 53.2 but continued to expand.
  • The engineering construction sector contracted, falling by 3.9 points to 47.2.

Peter Burn, Australian Industry Group Director – Public Policy, commented on the results: "The residential and commercial construction subsectors are building a head of steam with a welcome strengthening in activity, an upturn in employment, further growth in new orders and more attractive selling prices. In July, momentum in these sub-sectors ensured the overall construction sector remained in positive territory despite the ongoing slowdown in engineering construction as investment in mining-related projects fades. While house building has been strong for some time and apartment building is at healthy levels, the broadening of growth to include commercial construction is a welcome addition to the mix. With fewer resources committed to expanding the mining sector, there is plenty of engineering construction capacity becoming available to accommodate a lift in infrastructure investment."

Furthermore, Housing Industry Association Chief Economist, Harley Dale, noted: "A second consecutive expansion in the Australian PCI® in July, driven by three of the four subsectors, is a tick in the box for the Australian economy as well as the construction industry itself. Labour market outcomes as well as economic growth will be assisted in 2014/15 by Australia's construction industry, led by what is already a strong recovery in new home building activity. The Australian PCI® activity and new orders sub-indices for houses and apartments are providing a further signal that the building approvals cycle has peaked, within which approvals should remain at historically elevated levels for a time yet. In terms of actual construction activity, a more concerted focus on housing policy reform would greatly assist the prospect of extending the current up-cycle beyond this year."

Adapted from press release by Rosalie Starling

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