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Australian PCI®: Construction edges ahead in April

The national construction industry edged slightly into expansion in April, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) rising by 5.6 points to 50.8 (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase).


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Ai Group Head of Policy, Peter Burn, said: "The slight improvement in the performance of the construction sector in April saw a surge in the engineering construction sub-sector offset falls in activity and new orders in the residential and commercial construction sub-sectors. With the wind-down of mining-related projects, engineering construction has been a drag on the overall sector's performance for the best part of two years. The April turnaround in activity and new orders in this sub-sector reflects a renewed pipeline of transport infrastructure projects. While this pipeline is not likely to completely offset the further fall in mining-related work, the outlook for residential and commercial construction lifted somewhat this week with the Reserve Bank's reduction in the cash rate," Dr Burn said.

HIA Economist, Diwa Hopkins, said: "Today's results show that activity in Australia's residential construction sector is easing back from the record levels of 2015. The latest cut to the official cash rate - and critically, its pass-on by the major lenders - will support healthy levels of new home building over the near to medium term. Nevertheless, the level of building is still likely to be shy of what occurred in 2015. An improvement in infrastructure construction drove the rise in the Australian PCI® headline index in April. This is an encouraging development that needs to be sustained in the face of more challenging prospects for growth elsewhere in the construction industry," Ms Hopkins said.

Australian PCI® - Key Findings for April:

  • Across the four sub-sectors in the Australian PCI®, engineering construction returned to growth following a 21-month period of contraction (up 9.9 points to 54.6) but commercial construction weakened, ending two months of mild growth (down 5.4 points to 45.0).
  • Apartment building activity was more subdued in April, slipping marginally back into contraction (down 2.1 points to 49.5), while house building contracted for a third straight month, if at a slower rate (up 4.1 points to 45.2).
  • The construction activity sub-index improved solidly in returning to expansion (up 5.3 points to 51.0) and employment also recovered strongly after two months of decline (up 12.8 points to 54.5).
  • New orders continued to contract in April, although the marginal rate of decline was the slowest in five months (up 4.2 points to 49.0).
  • Growth in the wages sub-index continued in April (up 2.0 points to 60.8), while the input prices sub-index remained elevated (up 3.1 points to 70.5).
  • The selling prices sub-index fell by 7.2 points to 43.6, dropping below the no-change threshold for the second time in three months as pressures on profit margins remain strong.   

Media Inquiries:         Tony Melville (Ai Group):                     0419 190 347
                                    Diwa Hopkins, Economist, HIA:            02 6245 1308

 

Index
this month

Change from
last month

12 month
average

 

Index
this month

Change from
last month

12 month
average

Australian PCI®

50.8

          5.6

48.8

New Orders

49.0

          4.2

       47.9

Activity

51.0

          5.3

48.5

Employment

54.5

        12.8

 50.2

Houses

45.2

          4.1

49.2

Deliveries

47.8

-3.0

 48.6

Apartments

49.5

         -2.1

57.0

Input Prices

70.5

          3.1

 68.8

Commercial

45.0

         -5.4

47.1

Selling Prices

43.6

-7.2

 47.0

Engineering

54.6

          9.9

44.8

Wages

60.8

          2.0

 59.7

 

 

 

 

Capacity Utilisation (%)

76.2

 1.5

 72.9

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. 

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