Construction bounces back in September

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September PCI results gallery A number of road and rail construction projects have helped the Australian PCI bounce back to growth in September. September PCI results gallery

Australia’s construction industry has bounced back in September with the Australian PCI returning to growth for the month after contracting in August.

The overall Australian Industry Group/Housing Industry Australia index rose 4.8 points to 51.4, with readings above 50 indicating growth.

The Ai Group says the growth was concentrated in the engineering construction sector, with a number of road and rail projects currently underway boosting performance.

"The continuation of a run of growth in engineering construction lifted the overall construction industry into expansionary territory despite slight falls in residential and commercial construction activity in September," Ai Group head of policy Peter Burn says.

"The number of road and rail projects underway or in prospect – particularly in the eastern states – is boosting the engineering construction sub-sector and countering the further wind-down of big mining-related projects."

The report also indicated a decline in the residential construction sector, with house-building activity contracting for a second consecutive month, registering 49.1 points. This, however, is an 8-point increase over August’s findings, indicating that the decline is slowing.

Apartment construction activity also fell 7.4 points to a slight contraction of 49.1 points, reflecting the fact that new orders have fallen in four of the last six months.

"Both house building and apartment building activity contracted marginally during September," HIA senior economist Shane Garrett says.

"However, the pace of decline on the house building activity side has eased while apartment building activity has moved from expansion mode in August to contraction in September.

"Over the next few years, we expect a modest decline in home building to occur with a much larger reduction in apartment building activity," Garrett adds.

Growth in the wages sub-index continued throughout September, and input prices remained elevated (sitting at 64.7 points). The selling prices index grew 3.8 points to 51.7, indicating cost pressures faced by builders are now being passed on to customers.


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