Construction sector grows after surprise run

THE construction sector has lifted into growth territory for the first time this year according to the latest AIG/HIA Australian Performance of Construction Index (Australian PCI). 

The seasonally adjusted index lifted 5.1 points to 51.8 in June (readings above 50 indicate an expansion in activity).

In addition to house building growth - up 2.2 points to 56.6, engineering construction jumped 16.3 points to 51.1 with a pipeline of infrastructure work on the east coast getting underway. 

Boosts in overall new orders, activity and deliveries also contributed to the positive monthly reading. This growth was, however, partly offset by falls in apartment building (49.2) and commercial construction (49.8).

Australian Industry Group Director - Public Policy, Peter Burn, said "the Australian construction sector closed off the financial year on a positive note by lifting back into growth following five slow months."

"The housing sub-sector went from strength to strength marking a tenth straight month of expansion with an accelerated pace of increase in June. 

"The stars aligned for engineering construction with an unexpected lift in activity on the back of local government and infrastructure projects. 

"However, new orders in the engineering construction sub-sector continued to fall and, with the mining construction boom now winding down, the outlook for this sub-sector is for ongoing weakness."

Housing Industry Association Economist, Diwa Hopkins, said the slow start to the year hasn't held the PCI back from breaking through the 50 point marker.

" Underscoring this improvement has been residential construction activity, with house building in particular remaining a continuing source of strength - June represented the tenth consecutive month of growth in activity for this sub-sector of construction," she said.

"While the pipeline of infrastructure work on the east coast is boosting conditions in engineering construction, commercial construction still remains a weak area within the broader industry - its sub-index is yet to indicate that a sustained expansion is underway. 

"Coming updates to the Australian PCI will shed light on how this situation develops and, ideally, improves."

Australian PCI® Key Findings for June:

  • The latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) grew in June for the first time this year - up 5.1 points to 51.8 to be above the 50 point expansion level.
  • Construction activity grew 6.1 points to 53.1 in June.
  • Across the sub-sectors:  House building registered 56.6, apartments 49.2, commercial construction 49.8 while engineering construction was 51.1 in the month.
  • The new orders sub-index expanded for the first time since December 2013 - lifting 6.7 points to 52.6.
  • Construction employment remained weak at 47.4.
  • While selling prices were higher at 50.6, input prices were also stronger in June - 73.7.