Construction dips again

The monthly Australian Performance of Construction Index (Australian PCI) fell by 4.8 points to 37.9 in August, with conditions worsening again after seemingly positive signs in July.

Readings below 50 points indicate contraction in activity, with lower results indicating a faster rate of contraction.

"The sharp fall in activity in Victoria was a major factor in the downturn while border restrictions in other states have hampered builders and constructors who are reliant on interstate supplies and the availability of tradies from across borders,” said Ai Group Head of Policy, Peter Burn.

“Businesses in the industry have been watching their order books closely for some time and the further decline in orders in August will be a major concern both for their businesses and for their employees and suppliers.”

The new orders index fell by 8.4 points to 35.1 in August, indicating a sharper decline and wiping out most of July's gain. The construction activity index fell a whopping 14.5 points to 31.1.

All four construction sub sectors experienced significant dips. Engineering construction activity fell by a worrying 18.5 points to 27.0, plummeting to levels approaching recent historic lows. Apartment building activity fell a further 11.1 points to 22.8, while residential building dipped 9.6 points to 37.4 after experiencing a brief period of growth earlier this year.

Commercial construction also fell 9.6 points to 32.4.

HIA Economist, Angela Lillicrap, said the demand for apartments is likely to be constrained until population growth returns, which has been severely affected due to the COVID-19 pandemic.

“The HomeBuilder program will bolster activity in the detached house segment, but the broader softening in new orders highlights the risks facing the residential building sector," she said.

The index for input prices increased by 9.0 points to 67.3, while the selling prices index recovered 6.6 points to 42.4, remaining relatively weak due to reduced demand across all parts of construction.

The average wages index is up 6.1 points to 53.5, while the employment index recovered from recent lows, increasing by 4.7 points to 46.1.

Survey participants have continued to stress the importance of the JobKeeper and Apprentice Support schemes in maintaining employment and incomes in the current climate.