The national construction industry expanded for a 15th consecutive month in April, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) easing slightly by 1.8 points to 55.4 (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: “Australia’s construction sector continued to expand in April. However, there are suggestions of an easing in conditions. April saw a moderation in both activity and new orders growth, although businesses continued to increase their employment levels in a strong sign of an industry still confident in its overall near-term outlook. A growing pipeline of major project work saw strongest growth in the commercial and engineering construction sectors. In contrast, the retreat in apartment building is continuing while the housing sector stabilised in the month – consistent with building approvals data which are below their peaks and continue to point to a cooling in housing construction,” Dr Burn said.
HIA Senior Economist, Geordan Murray, said: “The Australian PCI® report continues to illustrate the divergent conditions affecting the various parts of the nation’s construction industry. On balance it presents a positive outlook for the remainder of 2018. The improved investment outlook for non-mining businesses is translating into the long-awaited improvement in demand for commercial construction. This is a timely development but the overall economic impact is likely to be somewhat negated by a slowdown in apartment construction. The engineering construction sector has endured the downturn in mining-related activity and is now benefiting from the boom in public sector investment in transport infrastructure,” Mr Murray said.
Australian PCI® – Key Findings for April:
- The construction industry’s 15th consecutive month of expansion was supported by continued growth in activity (down 5.4 points to 51.6) and new orders (down 3.4 points to 56.5), if at a slower pace than in March. Businesses also continued to increase their workforces, with employment marking a full year of expansion with its highest pace of growth in 3½ years (up 3.8 points to 59.5).
- Commercial construction was again the strongest performing sub-sector in April, with its rate of growth only mildly slower than March’s 12½ year high (down 1.0 point to 64.0). Engineering construction also expanded at a slower rate (down 5.3 points to 53.2) in achieving a 13th consecutive month of growth amid ongoing support from state government capital works.
- In the residential sub-sectors, house building activity was stable in April (down 2.3 points to 50.3 – its lowest reading in 11 months), while apartment building weakened further (down 6.6 points to 43.3).
- Input price inflation remained elevated in April (down 1.4 points to 74.5), while growth in wages appears to be gaining strength as increased demand for workers supports higher wages in the industry (up 1.3 points to 63.3). The selling prices sub-index declined marginally by 0.1 point to 57.7, suggesting that cost pressures are being passed on in part, but still not broadly given strong market competition.