Construction off to strong start in 2018

Following a slight dip in December, building activity across the board has picked up strongly in the first month of the year, with commercial construction leading the way in activity expansion levels.

The latest Australian Performance of Construction Index (Australian PCI) rose by 1.5 points to 54.3 in January 2018, with readings above 50 indicating an expansion in activity.

The index and construction activity report is compiled by the Australian Industry Group and Housing Industry Association and is released every month.

All four construction sub sectors expanded in January, with commercial construction recording the highest growth, rising 7.4 points to a strong 58.9.  House building activity continued to expand but slowed for a second consecutive month (down 2.5 points to 52.0), while apartment building's marginal rate of growth was unchanged from December (50.7 points). After recording a ten-year high in November 2017, engineering construction’s rate of expansion slipped further, down 3.4 points to 53.5.

The employment sub index rose to its highest point in six months, up 3.3 points to 58.0, while new orders bounced back from the red to hit 51.8 in January.

Input prices, wage growth and selling prices also recorded expansions in the past month.

“January marked a full year of monthly growth in Australia's construction sector according to the Australian PCI,” says Ai Group Head of Policy, Peter Burn.

“While new orders only lifted modestly in January, further employment growth is a strong sign of an industry still confident over its near-term outlook.

“The pace of wages growth lifted again in January whereas non-wage costs also rose but at a less frantic pace than in recent months.”

According to HIA Senior Economist, Shane Garrett, the continued expansion in apartment building has had a positive effect on the rental market.

“A considerable proportion of these new apartments have been delivered on to the rental market – helping to bring rental inflation to a 24-year low during 2017,” he said.

“This is good news for those who rent rather than own their homes.”