Australia’s construction sector grows at fastest rate for 12 years

July saw the largest growth in the Australian construction industry for at least 12 years, new findings reveal.

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) increased by 4.5 points to 60.5 in July, signaling the strongest acceleration of industry growth since the survey’s inception in September 2005.

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 national construction industry has continued its strong run with infrastructure work, a resurgent commercial construction sub-sector and ongoing healthy levels of activity in residential building combining to more than offset the further wind-down of mining-related work.

“The buoyancy of the sector is evident in strong levels of current activity and employment growth and growing order books. The long-awaited pick-up in commercial construction seen over the past three months is particularly welcome in light of the anticipated wind-down in apartment building from the very high recent levels and suggests that the national construction industry will continue to play a leading role in the economy for some time to come.”

Some key findings from the report include:

• All four construction sub-sectors expanded in July, with house building (up 3.4 points to 62.4) and commercial construction (up 9.8 points to 64.3 – its highest level in 12 years) the major drivers of growth. More robust conditions were also evident in engineering construction (up 6.9 points to 57.5) and apartment building recovered ground, returning to modest growth (up 4.3 points to 52.6).

• Growth in new orders (up 2.7 points to 64.6) and activity (up 5.2 points to 58.3) accelerated in July to rates among the strongest in the survey’s 12-year history, leading to solid expansions in deliveries from suppliers (up 6.4 points to 59.2) and employment (up 4.8 points to 59.0).

• Cost pressures in construction intensified in July, with the input prices sub-index up 7.4 points to 73.6 and wages growth also continuing (up 3.7 points to 64.6). Growth in the selling prices sub-index (up 6.7 points to 59.1) suggests costs are being passed on, but not broadly given strong market competition.
   

HIA Principal Economist, Tim Reardon, said: “The ongoing boom in apartment construction in metro areas, combined with investment in infrastructure projects, is ensuring strong conditions across the sector. The housing industry has been cooling from record highs in 2016 but there remains a significant amount of work in the pipeline."