Construction industry benefits from continued growth

October has seen continued growth in the national construction industry, largely due to an increase in apartment building activity, according to data released in the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI).

This was the fastest pace of growth ever recorded in the survey’s 10-year history, up 9.2 points to 72.4.

Overall, the index registered 52.1 points in October, above the critical 50-point level (which separates expansion from contraction) and up slightly by 0.2 points from September.

“The strong run of apartment-building activity continued in October and commercial construction edged closer to expansion,” said Peter Burn, Ai Group head of policy.

“In contrast, house building slipped into negative territory and engineering construction remained in contraction. The higher level of activity in the apartment subsector was sufficient to extend the overall construction sector expansion into a third month.”

He said expectations of further growth in the months ahead will be encouraged by the higher levels of new orders recorded for the apartment, engineering and commercial construction subsectors, which is a further sign of a long-awaited broadening of the base of economic growth.

HIA Chief Economist Harley Dale said the Australian PCI result for October reinforces the important role that residential construction is playing in driving broader economic activity.

“The strong findings for apartments are consistent with the considerable pipeline of activity, while the overall trajectory for detached houses signals healthy construction in 2015–16, albeit off the cyclical peak of last year,” said Dale.

“That is, however, a sharp monthly decline in the house-building subindex, and some reversal will hopefully come through in November. There are signs emerging of a broadening strength to the construction industry — the results for the commercial and engineering construction sectors are encouraging.”

Data also showed that employment was stronger across the construction industry during October, up 2.3 points from September — the second-highest growth in the past 12 months — indicating that job creation is being supported by the continuation of rising demand at the aggregate level.

For further information, go to: www.aigroup.com.au/economics/.

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