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Australian PCI®: Construction remains in negative territory

The national construction industry continued to decline in November, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) remaining relatively unchanged at 46.6 points (readings below 50 indicate contraction in activity, with the distance from 50 indicating the strength of the decrease). 

The national construction industry continued to decline in November, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) remaining relatively unchanged at 46.6 points (readings below 50 indicate contraction in activity, with the distance from 50 indicating the strength of the decrease). 
 
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Ai Group Head of Policy, Peter Burn, said: “The national construction sector contracted across the board in November with falls in residential, commercial and engineering construction and declines in activity, new orders and employment. While there is some encouragement in the form of transport infrastructure activity, particularly in the south-east corner of the country, this is being overshadowed by the continuing decline of mining-related construction and the retreat of residential building from the unusually high levels evident over the past couple of years. At a whole-of-economy level, the retreat of the construction sector highlights the need for new sources of growth to emerge,” Dr Burn said.
 
HIA Senior Economist, Shane Garrett, said: “Today’s Australian PCI® report indicates that activity in both the detached house and apartment sides of the market contracted again during November. This pattern is consistent with last week’s building approvals data as well as the latest HIA New Home Sales report which all suggest that residential building activity is moving lower although the picture varies substantially around the states. Latest HIA forecasts anticipate that the decline in new dwelling starts will last into 2018. The decline on the detached house side is expected to be quite mild, compared with a much more substantial reduction in apartment building over the next few years,” Mr Garrett explained.
 
Australian PCI® – Key Findings for November:

  • The Australian PCI® increased by 0.7 points to 46.6 in November to remain in contraction.
  • The activity sub-index of the Australian PCI® fell at a steeper rate in November (down 2.6 points to 44.9), while reductions in new orders (up 3.8 points to 48.4) and deliveries from suppliers (up 9.8 points to 48.3) were less pronounced. Employment (down 4.8 points to 45.4) returned to contraction.  
  • All four sectors of the Australian PCI® contracted in November. Apartment building declined for a third straight month, albeit at a slower rate (up 4.8 points to 44.7), while house building spent a fourth month in negative territory (down 0.1 points to 47.2). Engineering construction slipped to its lowest reading since September 2015 (down 2.9 points to 41.4) while commercial construction recovered some ground towards stability (up 7.2 points to 48.7).
  • Growth in the wages sub-index continued in November (up 1.1 points to 59.5), while input prices remained elevated (up 2.9 points to 65.2). The selling prices sub-index increased by 11.7 points to 56.0, suggesting the pressure on input prices and wages is being passed on (at least partially).

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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®

46.6 

0.7 

48.3 

New Orders

48.4

3.8

46.9

Activity

44.9

-2.6

48.6

Employment

45.4

-4.8

50.0

Houses

47.2

-0.1

49.5

Deliveries

48.3

9.8

47.6

Apartments

44.7

4.8

49.5

Input Prices

65.2

2.9

66.7

Commercial

48.7

7.2

47.1

Selling Prices

56.0

11.7

48.9

Engineering

41.4

-2.9

47.5

Wages

59.5

1.1

61.1

       

Capacity Utilisation (%)

78.1

6.5

74.6



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.

Release dates for Australian Performance Indices in 2017

Media Enquiries
Tony 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