Construction hits record high

The Australian Performance of Construction Index (PCI), adjusted monthly by the Australian Industry Group and Housing Industry Association, climbed 4.4 points to 61.8 in March to deliver the strongest monthly result in the index's history.

This was in stark contrast to conditions just 12 months ago, when activity in the sector plunged to record lows as a result of the pandemic.

With the HomeBuilder incentive ending on March 31, the index for new orders, employment and supplier deliveries skyrocketed as buyers/renovators scrambled to lodge their applications before deadline and house builders rushed to commence residential projects as soon as possible in order to meet deadline.

All four construction sub sectors remained firmly in the expansion phase with residential construction leading the way with an index of 70.2 (readings above 50 indicate expansion with the distance from 50 indicating strength of expansion.)

Engineering construction also climbed 1.7 points to 59.1 while apartment construction continued to hold strong, sitting in expansion at 53.4 following sluggish conditions in recent years. Commercial construction also remained stable at 56.2.

The new order index jumped a whopping 14.6 points to 64.7, reflecting the mad rush of last minute applications before HomeBuilder ended. Employment also surged to a record high of 63.1 as residential builders increased work hours and staff numbers to meet project requirements. The wages index also surged to its highest monthly result since 2008 at 71.8.

Input prices jumped 12.7 points to 92.9, reflecting a combination of supply delays and constraints as well as rising prices for imports and freight. The selling prices index also rose to 71.8, reflecting the strong demand especially in the residential sector.

The jump in demand ultimately spells good news for the sector, said Ai Group Head of Policy, Peter Burn.

“While this surge in new orders is very likely to fade from here on, work will continue to flow through construction supply chains for many months and will provide ongoing stimulus to the sector and the broader economy," he said.

While apartment building remains in the growth phase for now, its future remains uncertain, said HIA Economist, Angela Lillicrap.

“The outlook for multi-units, unfortunately, will remain poor in the absence of overseas migrants, students and tourists," she said.