Slow end to 2017 for construction sector

The construction industry has ended 2017 on a whimper following a stellar year of growth, according to the Australian Industry Group and Housing Industry Association’s latest construction activity report.

The Australian Performance of Construction Index (Australian PCI) for December 2017 dropped by 4.7 points to 52.8, indicating a loss in growth momentum, however still recording an expansion in activity. (readings above 50 indicate activity expansion)

Across the sub sectors, engineering construction and house building remained the strongest performers, however both sectors recorded a significant slowdown in activity compared to November findings (PCI down 7.2 and 6.8 points respectively)

Commercial construction also experienced a drop in activity from November (down 8.3 points to 51.5), however apartment building picked up slightly, bouncing back from the red to reach a PCI of 50.7.

The new orders sub index drifted into the red in December, dropping 7.5 points to 49.2, recording the lowest new orders result in nine months. The weakness in new orders points to the likelihood of a further easing in overall industry activity levels at the start of 2018.

“Builders and constructors reported higher input costs – with energy, construction materials and wages all on the rise,” says Ai Group Head of Policy, Peter Burn.

“Looking at 2017 as a whole, even with the steady retreat in apartment building, construction activity was robust through the year.

“While the pace of growth may well ease, continued healthy levels of work across the industry look set to see a solid start to 2018.”

HIA Senior Economist, Shane Garrett, says the expansion in activity in the house and apartment building sub-sectors is welcome news.

“Over the past year, apartment building in particular has been placed under pressure by the steady widening of foreign investor penalties across the states,” he says.

He adds foreign investor participation in apartments is vital for the survival and growth of the rental market in Australia.

“Impeding investor participation risks undermining the healthy functioning of rental markets everywhere,” Garrett says.