Commercial construction pushes growth in April

Australia’s building sector has recorded its 15th month of expansion in April, with commercial construction continuing to lead the way.

The monthly Australian Performance of Construction Index (Australian PCI), compiled by the Australian Industry Group and Housing Industry Association, eased slightly by 1.8 points to 55.4 from March figures. Readings above 50 indicate expansion in activity.

After one of its strongest months in years, the commercial construction index dropped slightly by one point to 64, while engineering construction fell 5.3 points to 53.2.

Following several months of constant highs, the residential construction sub sectors are slowing down, with apartment building falling into negative territory (down 6.6 points to 43.3). Housing construction recorded its lowest reading in 11 months at 50.3.

Employment in the industry has hit a 3.5-year high to record an index of 59.5, reflecting an increasing demand of professionals in the industry to support the ongoing roll out of major projects around the country. In direct response to this, the wages growth index has also increased by 1.3 points to 63.3, with businesses using higher wages to attract the right talents.

The selling prices sub-index declined marginally by 0.1 point to 57.7, suggesting that cost pressures are being passed on in part, but still not broadly given strong market competition.

“April saw a moderation in both activity and new orders growth, although businesses continued to increase their employment levels in a strong sign of an industry still confident in its overall near-term outlook,” said Ai Group Head of Policy, Peter Burn.

HIA Senior Economist, Geordan Murray, said the latest index presents a positive outlook for the remainder of 2018.

“The improved investment outlook for non-mining businesses is translating into the long-awaited improvement in demand for commercial construction,” he said.

“This is a timely development but the overall economic impact is likely to be somewhat negated by a slowdown in apartment construction.”

“The engineering construction sector has endured the downturn in mining-related activity and is now benefiting from the boom in public sector investment in transport infrastructure.”