Australia’s construction industry has bounced back in June with the Australian Performance of Construction Index (Australian PCI) increasing 6.5 points to 53.2.
The jump is the highest rate of expansion seen in the sector for 10 months.
The report, compiled by the Australian Industry Group (Ai Group) and the Housing Industry Association (HIA), shows the upturn is fuelled predominantly by residential construction, with the houses sub-sector and apartment sub-sector showing activity levels at 62.1 and 55.2 respectively.
Readings above 50 indicate growth, with the distance from 50 signifying the strength of that growth.
Encouragingly, the commercial and engineering sub-sectors also showed growth, albeit at a slower rate than the residential sector.
“We have seen a broad-based recovery in the Australian PCI in June 2016,” HIA chief economist Harley Dale says.
“The results serve as a reminder that new residential construction remains the powerhouse of the domestic Australian economy. At the same time, non-residential construction has some spark to it, but the breadth of recovery is still proving elusive.
“The latest Australian PCI update highlights the importance of the construction industry to the Australian economy and the results are consistent with our outlook for both residential and non-residential construction activity.”
The input prices sub-index remained elevated at 67.5 points in June. However, it showed a decrease of 0.3 points from May, indicating there is very little easing in cost pressures being faced by the sector.
The selling prices sub-index showed an increase of 1.3 points to 51.3 showing that the increased cost pressures are being passed on to the consumer.
The Ai Group says it’s pleased with the increase in new orders across the sector (up 9.2 points to 52.5).
“The construction sector hit a sweet spot in June with the bounce in the Australian PCI driven by growth across all of the sub-sectors and with solid gains in activity, employment and new orders,” Ai Group head of policy Peter Burn says.
“The residential sub-sectors of house and apartment building were the standout performers both in current activity and in new orders, suggesting they are on track to continue their expansionary run over the near term.”