Earthmoving News

Construction falls on material shortage

Limited labour materials and the prolonged impacts of the Omicron strain has seen a contraction in the country’s construction sector

Volatility in the construction sector was largely driven by national supply chain issues and the unavailability of COVID-positive staff

Following a glimpse of revival of Australia’s construction industry in November last year, the sector has reversed its recovery and returned to the volatile run which was ever-present over the last six months.

Volatility in the construction sector was largely driven by national supply chain issues, the unavailability of staff who returned a COVID-positive result and a reduction in new apartment construction activity, according to a monthly national performance index.

The Australian Performance of Construction Index (PCI), which is produced by the Australian Industry Group (Ai Group) and Housing Industry Association (HIA) each month, eased to 45.9 across December and January.

Any measurement in the index above 50 suggests the industry is still expanding, while numbers below that mark indicate contraction.

The 11.1-point month-on-month decrease since the PCI’s last recording in November is a steep contraction and represents the weakest result since August 2021.

As outlined in the report, the steep decrease represents a faster rate of contraction.

Ai Group head of policy Peter Burn says the PCI’s figure projects a constrained beginning to the 2022 year and further uncertainty could continue.

“The Australian construction industry continued its volatile run of the past six months with a slump in performance over December and January,” he says.

“This latest downturn was driven by disruptions to labour supply, material supplies and business and household confidence associated with the rapid spread of the Omicron strain.”

“As they have done for some time, builders and constructors reported labour shortages although in this period the unavailability of existing staff who were COVID-positive or required to isolate exacerbated the problem,” Burn added.

“Builders and constructors are hoping the reductions in COVID-19 infections evident over the past couple of weeks will ease some of the extra constraints evident over the past couple of months but they, like everyone else, are geared for further uncertainty and volatility.”

Overall construction activity across December and January was down significantly across all four sectors denoted in the PCI, with apartment construction recording the largest drop (down 34.9 points) while commercial building (-29.3) and house building (-6.6) all fell further into contraction.

Engineering construction fell by 16.7 points but remained neutral on the PCI to remain at an even 50.0.

In all, overall construction regressed by 18.9 points to sit at 41.1 points against data from November and is well below the 53.3-point 12 month average, however Queensland was the only state to record activity growth across the period.

Elsewhere, new orders (down 10.8) and supplier deliveries (down 10.4) dropped steeply to finish at 47.7 and 34.4 respectively across the country.

The demand for building materials and house-building supplies resulted in moderated results for input prices (down 1.5 points) to remain significantly strong at 96.0.

Elevated selling prices continued, rising by 3.4 points to finish at 81.4, as builders continued to pass on their cost increases.

Employment regressed slightly, down 2.5 points, however it remained in at 56.5 point, signifying 16 consecutive months of expansion. Wages rose 2.7 points to 76.0.

“Home builders are still limited by the availability of land, labour and materials. The HomeBuilder pipeline has only recently started reaching completion, with many more completions to come,” says HIA economist Tom Devitt.

“Ongoing demand as part of the shift in homebuyer preferences towards more space and greater amenity will continue to keep builders busy into 2023.

“The inflationary impact of supply chain issues is relatively contained to fuel prices and home building costs.”

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