Australian PCI®: Construction contraction eases in November

Download full report

Peter Burn, Chief Policy Advisor at the national employer association Ai Group said: "Activity in the Australian construction sector was mildly weaker in November on the back of two positive developments. Reduced absenteeism due to illness improved labour availability and supply chain disruptions eased. However, the industry remains in mild contraction, and wage and input costs remain elevated and are still growing. The cumulative effect of interest rate rises and increased economic uncertainty poses concerns for the industry looking forward," Dr Burn said.

HIA Economist, Tom Devitt, said: "The RBA has already had a material impact on home buyer interest in the market. New home sales and home lending have dropped substantially. Labour shortages also look to have peaked, aided by the return of overseas workers and fewer worker hours being lost to illness. This should help ease price pressures. But the lags that characterise this cycle mean the full impact of the RBA's hikes to date won't be seen until the second half of 2023. Further hikes in 2023 would jeopardise the housing industry's 'soft landing' in 2024 and beyond. This undermines the Australian Government's goal of one million new homes in the five years to the end of 2028. This would have serious implications for housing affordability across Australia," Mr Devitt said.

Australian PCI® – Key Findings for November 2022:

• Two construction subsectors contracted and two were stable in November. This is the third time none of the sub sectors in the Australian PCI® recorded growth since August 2021.
• The employment index rose into weak expansion as absenteeism eased.
• Demand side pressures, including rising interest rates and economic uncertainty, are dampening construction sales and new orders.
• Supply side constraints, especially a shortage of skilled trades, continue to inhibit activity, but there are signs of materials supply chain pressures easing.
• The selling prices indicator expanded at a slower rate compared to the previous two months. Input prices jumped up to 91.9 points, indicating the gap in growth between prices widened.
• Capacity utilisation rose slightly to 82.9% and remains elevated as it has been since the start of 2021.

View all Economic Indicators 

Results above 50 points indicate expansion. 

Background: The Ai Group/HIA Australian PCI® is a seasonally adjusted national composite index based on the diffusion indexes for activity, orders/new business, deliveries and employment with varying weights. An Australian PCI® reading above 50 points indicates that construction activity is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline.

AVAILABLE HERE:
All 2022 release dates for Australian PCI®

Media Enquiries
Tony Melville (Ai Group) – 0419 190 347
Tom Devitt (HIA Economist) – 0439 514 656