Construction industry maintains growth in September

The national construction industry is continuing to show healthy levels of growth, with engineering and housing construction driving the highest activity levels for the month of September.

Although down slightly from August, the Australian Performance of Construction Index (PCI) for September sits at 54.7, with readings above 50 indicating expansion in activity. The report and readings are collated each month by the Australian Industry (Ai) Group and Housing Industry Association (HIA).

The house building sector activity sub-index registered 56.6 points, up marginally by 0.1 points from August. In line with the ramp-up in government infrastructure spending, engineering construction activity remained strong with a reading of 56.9 points.

Apartment building activity dropped to its lowest in 11 months, with the sub-index registering 41.4 points in September, down 3.3 points from August.

New orders in the house building sector increased at a slower pace in September with the sub-index falling by 3.6 points to 53.5 points. However, September marked the eighth consecutive month of growth in new orders.

"September saw a continuation of the healthy levels of overall construction activity that have prevailed for most of the year to date,” says Ai Group Head of Policy, Peter Burn.

“While apartment building is winding down and commercial construction was flat, both engineering construction and house building continued to grow relatively strongly in September.

“Construction sector employment lifted again and wages growth accelerated in the month. With new orders still on the rise for the sector as a whole, the outlook over the next few months is positive even though the indications are for further contraction in the apartment sub-sector.”

HIA Senior Economist, Shane Garrett, says the slowdown in apartment construction is inevitable.

“New apartment building has grown to unprecedented highs over the past five years and it is inevitable that we would see a retreat from these levels,” he says.

“Residential building has been cooling from record highs and is set to decline over the next couple of years so the expansion of detached house building market this month is a welcome reprieve.”

Construction employment continued to expand with the employment sub-index sitting at 55.4 points. This reflects an increase of 3.9 points from the previous month.

Growth in wages continued in September, and at a higher rate than in August, with the sub-index rising by 1.5 points to 66.8 points. According to the report, that was by far the fastest rate of wage expansion in almost nine and a half years.