Construction maintains upward momentum
Building activity continues expansion in November on the back of booming engineering and commercial construction sectorsAustralia’s construction sector is set to end 2017 on a high note following increased activity across the entire sector, except apartment building.
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) climbed 4.3 points to 57.5 in November, indicating expansion in activity in the construction sector for the tenth consecutive month.
Across the four construction sub-sectors, engineering construction remained the strongest performer, recording an 11-and-a-half year high (up 3.2 points to 64.1) thanks to the ongoing roll out of large-scale infrastructure projects.
House building activity also strengthened due to continuing demand and a solid backlog of work (up 8.2 points to 61.3).
Commercial construction hit its highest activity level in three-and-a-half years (up 9.7 points to 59.8), while apartment building contracted for a fourth consecutive month (up 0.9 points to 47.7)*.
New orders, deliveries from suppliers, employment and wages also experienced an upward momentum, all recording expansions in activity.
"Activity in the construction sector which has been expanding for most of the year accelerated further in November as higher activity levels in both engineering construction and house building were backed up by a surge in commercial construction,” says Ai Group Head of Policy, Peter Burn.
“The granular sub-indexes in the Australian PCI point to strong employment growth and provide further evidence of a steady pick-up in wages.
“With new orders also in positive territory, the sector looks like closing 2017 on a high.”
HIA Senior Economist, Shane Garrett, says low interest rates and unprecedented migration helped push the home building sector to its highest level of activity last year.
“With interest rates set to remain at record lows for longer than expected, the short-term outlook for new home building is stronger and today's Australian PCI result for detached house building is evidence of this,” he says.
“Looking further ahead, other factors – including regulatory restrictions – will force new home building to move lower over the next couple of years.”
*An Australian PCI reading above 50 points indicates that construction activity is generally expanding; below 50, that it is declining.
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