Construction recovery picks up pace

The Australian construction industry is continuing to bounce back strongly from record lows triggered by the pandemic last year, with the Australian Performance of Construction Index (PCI) going up a further 2.3 points to 57.6 in December 2020 and January 2021.

The pleasing result means the sector has recorded its fourth straight month of expansion after a disastrous run during most of 2020. Readings above 50 indicate expansion in activity, with higher results indicating a faster expansion.

Construction index back in black

Building sector continues on road to recovery

It is also the strongest result since July 2017, according to the Australian Industry (Ai) Group and Housing Industry Association (HIA), which adjust the PCI and associated indices on a monthly basis.

Out of the four sub-sectors in the PCI, only apartment construction is still in contraction, with the rest (engineering, commercial and house construction) firmly in the expansion phase.

Commercial construction jumped 9.7 points up to 62.5 in the last two months after a very sluggish couple of years of demand and activity. Engineering construction remained unchanged at 53.0.

Housing construction, which experienced a boom in recent months thanks to HomeBuilder, decelerated slightly but is still sitting strong at 65.3.

The new orders index increased by a healthy 6.9 points to 58.6, keeping the sector busy and creating more jobs as a result.

“The strong rise in new orders is particularly encouraging and points to the likelihood that coming months will see the recovery continue,” said Ai Group Head of Policy, Peter Burn.

“Notwithstanding the good news on recent activity and with interest rates set to remain low for several years, with immigration on hold there will be limited opportunity for residential construction, and particularly the apartment sector over the course of 2021.”

The index for input prices remained elevated at 76.4 in December and January as demand for building materials and house-building supplies surged. On the other end, the selling prices index is creeping strongly back into a growth phase (up 7.2 points to 58.7) after a lengthy period of stagnation.

The average wages index nudged up 1.1 points to 60.3 – its highest level since 2018 – while the employment index remained in strong expansion (down 0.6 points to 57.0) as activity resumed in more locations and the JobKeeper and Apprentice Support schemes provided important assistance.