April results show Australian construction looking up

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construction gallery The Australian PCI showed growth over the industry in April

There was good news for the Australian construction industry in April, with the Ai Group/Housing Industry Association (HIA) Australian Performance of Construction Index (Australian PCI) showing expansion for the month.

The Australian PCI rose by 5.6 points to 50.8 (readings above 50 indicate growth, with the distance from 50 indicating the strength of the increase). Across the four sub-sectors in the Australian PCI, engineering construction had the strongest growth, rising by 9.9 points.

This follows a 21-month period of continuous decline for the sub-sector, largely caused by the end of the mining boom.

"With the wind-down of mining-related projects, engineering construction has been a drag on the overall sector’s performance for the best part of two years." Ai Group head of policy Peter Burn says.

"The April turnaround in activity and new orders in this sub-sector reflects a renewed pipeline of transport infrastructure projects."

The strong growth in engineering construction offset contractions in other sectors. Commercial construction saw the sharpest fall, dipping by 5.4 points to 45. This comes after two months of growth for the commercial space.

The apartment construction sub-sector was down 2.1 points to 49.5, reflecting softer demand conditions in 2016 compared to those of last year.

"Today’s results show that activity in Australia’s residential construction sector is easing back from the record levels of 2015." HIA economist Diwa Hopkins says

"The latest cut to the official cash rate – and, critically, its pass-on by the major lenders – will support healthy levels of new home building over the near to medium term. Nevertheless, the level of building is still likely to be shy of what occurred in 2015."

While apartment construction was falling, house construction showed a slight rise of 4.1 to 45.2 points.

The report also shows increases to both employment levels and wages across the construction industry after two months of contraction. This is in contrast to the input prices index increasing by 3.1 points and selling prices contracting by 7.2 points.

The Australian PCI results demonstrate that despite an improvement in overall business conditions, pressures on profit margins remain strong amid further increases in input prices and construction wages and a highly competitive tender pricing environment.


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