Construction industry remains buoyant

A new report by the Australian Industry Group (Ai Group) and Housing Industry Association (HIA) shows strong growth in activity in the construction industry for a fifth consecutive month.

Despite the overall Australian Performance of Construction Index (PCI) falling slightly by 0.7 points to 56.0 in June, solid gains have been recorded right across the sector. (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase)

Across the four construction sub-sectors, house building rebounded strongly in June (up 13.4 points to 59.0), but activity in the apartment building sector weakened significantly in the wake of May's solid upturn (down 20.2 points to 48.3)

Commercial construction remained on a firm footing amid reports of rising project starts (down 0.7 points to 54.5), while engineering construction stabilised in June following two months of solid growth (down 9.3 points to 50.6).

"The immediate outlook for the construction sector as a whole is positive with new orders growing across the board," says Ai Group Head of Policy, Peter Burn.

"New orders for commercial construction have picked up noticeably over recent months after an extended period of weakness.

"In good news for the overall stability of the economy, the orderly easing back from the historically high peaks in apartment building is now being complemented by the long-awaited lift in commercial construction."

HIA Principal Economist, Tim Reardon, says while things remain positive for the housing sector overall, the effects are not likely to last long.

"While overall activity is still currently hovering at an elevated level, we anticipate that this new phase of the cycle will be characterised by a marked contraction in apartment building, while an easing in detached house building is likely to be far more measured," he says.

"With the positive contribution from the residential sector waning, if we are to see the Australian PCI remain in expansionary territory we will need to see a more broad-based recovery in non-residential construction."

See the full report here.