Construction continues to expand in July

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Australian PCI gallery A surge in free-standing house construction underpins July's positive Australian PCI outlook

There is tentative good news for the Australian construction industry, with the Performance of Construction Index (Australian PCI) recording growth for a second successive month in July.

The Ai Group/Housing Industry Association Australia index showed a reading of 51.6 (readings above 50 indicate growth). This is still an expansion, but represents a decline of 1.6 points from June.

The Ai Group believes that strong house construction numbers offset the fall in engineering construction and apartments.

"The construction sector grew again in July despite drags from the engineering construction and apartment sub-sectors," Ai Group head of policy Peter Burn says.

"The overall growth came on the back of further expansion in house building and a modest uplift in commercial construction."

Some of the key findings of the report were: although employment figures across the sector are still expanding, the rate of expansion has slowed; apartment construction has continued to fall from previously record highs; but resurgence in free-standing house construction and a small improvement in commercial construction have kept the overall picture positive.

"Apartment building is falling back from record levels while detached house building is a bit stronger," HIA senior economist Shane Garrett says.

"We expect that the share of new home building accounted for by apartments will decline to more long-term levels over the next few years. The failure of the major banks to pass on Tuesday's RBA interest rate cut means that any benefits for new home building activity are likely to be limited," Garrett says.

The report notes that while input prices increased at an ever-expanding rate (69.3 in July’s figures, an increase of 1.8 points), the selling prices sub-index was largely unchanged at 51.2 points.

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