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Australian PCI®: Construction returns to growth in September

The national construction industry returned to a mild expansion in September, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) lifting by 4.8 points to 51.4 (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase).

The national construction industry returned to a mild expansion in September, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) lifting by 4.8 points to 51.4 (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 continuation of a run of growth in engineering construction lifted the overall construction industry into expansionary territory despite slight falls in residential and commercial construction activity in September. The number of road and rail projects underway or in prospect – particularly in the eastern states – is boosting the engineering construction sub-sector and countering the further wind-down of big mining-related projects. While residential building remains at healthy levels, the easing of current activity and new orders recorded in the Australian PCI® suggests that we are near the top of the current cycle and that residential building is losing its position at the forefront of the restructuring of the economy," Dr Burn said.   HIA Senior Economist, Shane Garrett, said: "Both house building and apartment building activity contracted marginally during September. However, the pace of decline on the house building activity side has eased while apartment building activity has moved from expansion mode in August to contraction in September. Over the next few years, we expect a modest decline in home building to occur with a much larger reduction in apartment building activity," Mr Garrett said.   Australian PCI® – Key Findings for September:

  • The activity sub-index of the Australian PCI® improved marginally in September to remain in expansion (up 0.4 points to 51.8), while employment increased at its highest rate in two years (up 10.0 points to 57.6).
  • New orders contracted for a second month, but at a slower rate than in August (up 3.2 points to 48.7).
  • Apartment building activity was more subdued in September to be largely stable (down 7.4 points to 49.4), while house building contracted for a second month, but at a much slower rate (up 8.0 points to 49.1).
  • Engineering construction continued to expand on the back of non-mining infrastructure work (up 2.5 points to 58.0), but commercial construction activity weakened to end two months in expansion (down 5.1 points to 48.1).
  • Growth in the wages sub-index continued in September at a slower rate (down 6.4 points to 60.0), while input prices remained elevated (down 6.3 points to 64.7). The selling prices sub-index climbed 3.8 points to 51.7, indicating that the pressures on input prices are now being passed on – if only marginally – despite strong market competition.

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Index this month

Change from last month

12 month average

 

Index this month

Change from last month

12 month average

Australian PCI®

51.4 

4.8 

49.2

New Orders

48.7

3.2

47.8

Activity

51.8

0.4

49.0

Employment

57.6

10.0

51.2

Houses

49.1

8.0

49.4

Deliveries

45.9

8.6

48.8

Apartments

49.4

-7.4

55.3

Input Prices

64.7

-6.3

67.2

Commercial

48.1

-5.1

47.5

Selling Prices

51.7

3.8

48.2

Engineering

58.0

2.5

47.9

Wages

60.0

-6.4

61.5

Capacity Utilisation (%)

75.5

5.6

74.4

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. Media EnquiriesTony Melville (Ai Group) – 0419 190 347 Shane Garrett (HIA Senior Economist) – 0450 783 603 The Australian Industry Group (Ai Group) is a peak industry association in Australia which represents the interests of more than 60,000 businesses in an expanding range of sectors including: manufacturing; engineering; construction; food; transport; information technology; telecommunications; labour hire; and defence. The businesses which we represent employ more than 1 million people. aigroup.com.au