Construction sector abuzz with activity

April’s Australian Performance of Construction Index (Australian PCI) has indicated the construction sector is continuing to bounce back strongly post pandemic, albeit at a slightly slower pace following recent record highs.

The Australian PCI, measured monthly by the Australian Industry Group and the Housing Industry Association, fell by 2.7 points to 59.1 last month but remains firmly in the expansion phase. (Readings above 50 indicate expansion in activity, with higher results indicating a faster expansion)

The activity index, in particular, reached a record high of 62.8 points as builders nationwide scramble to commence new projects ahead of the HomeBuilder grant deadline, which has since been extended.

Home building and engineering construction continue to lead the way, with the indices sitting at 69.7 and 63.8 respectively.

“The uptake of HomeBuilder has beaten all expectations,” said HIA Economist, Tom Devitt.

“The extension of HomeBuilder's commencement deadlines means builders will be able to meet much more of this record demand over the coming year and fewer homebuyers will have to suffer the disappointment of cancellation due to capacity constraints.

“This will support home building activity for several years before the current absence of population growth spreads from the apartment sector to the rest of the housing market.”

Apartment building and commercial construction are also holding strong, sitting at 54.6 and 51.4 respectively.

The new orders index remained elevated despite dropping from March's record high (down 7.7 points to 57.0), having peaked in Q1 of 2021 in reflection of HomeBuilder's success.

The input prices index is still showing strong upward pressure but has eased from recent peaks (down 0.4 points to 92.5), while the selling prices index moved 1.5 points higher to 73.3 – a record high for this series, which commenced in 2008. This indicates that more builders are passing on their cost increases to customers.

The employment index fell by 3.9 points to 59.2 after hitting a record high in March while the average wages index also remains elevated despite easing in April (down 6.4 points to 65.4).