Construction employment hits new low

The latest Australian Performance of Construction Index (Australian PCI) continues to spell gloom for the local construction industry as it slipped a further three points to 42.6 in April.

Readings below 50 indicate contraction in activity, with the distance from 50 indicating the strength of the decrease. On the other hand, readings above 50 signify expansion and the distance from it shows the strength of growth.

While it comes as no surprise that activities across all sub sectors reported some lacklustre results, with the exception of engineering construction, a more concerning statistic is the rate at which construction employment is falling, which dropped a whopping 6.9 points to 39.2 in April.

According to the Australian Industry Group (Ai Group) and Housing Industry Association (HIA), which are responsible for the monthly index adjustments, that is the steepest contraction rate for employment in six years.

However, it’s not all doom and gloom as infrastructure construction, which has historically been the strongest performer out of the four sub sectors, has gone back into the black albeit at a slower rate (up 1.8 points to 51.4).

The three other key sub sectors continued to slide further into negative territory, with apartment construction remaining the weakest performer, sitting at 33.4.

Ai Group Head of Policy, Peter Burn, said the slight growth in engineering construction is thanks to the commencement of several new projects in the pipeline. However, it wasn’t enough to offset the contraction across all the other sub sectors.

“Although engineering construction is likely to remain an area of relative strength for the industry on the back of spending on large-scale, long-term publicly funded infrastructure projects, there is little sign of any near-term improvement in overall industry conditions,” he said.

“Highlighting this, employment fell further in April and at a rate that was the steepest in almost six years.

“There are now strong signs that adverse conditions in the broader construction industry are flowing through to sections of the services and manufacturing sectors.”

HIA Economist, Tom Devitt, said the low number of new home approvals does not help the state of house construction activities.

“As this pipeline of building work slows back to a new steady state, there will be an impact on employment in the building sector,” he said.

“Public infrastructure investments, strong population growth and low levels of unemployment will be crucial to supporting activity in the wider economy and preventing a more significant decline in home building activity.”

In addition, the selling prices index also fell at its steepest rate since 2013 – down 9.6 points to 31.8. With input prices still sitting at a fairly high index of 61.7, profit margins are squeezed for businesses in the construction industry.