Australian construction continues to grow

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House under construction A rise in free-standing house construction offset the drop in apartments in June House under construction

Australia’s construction industry extended its unbroken run of expansion in June, according to the latest Australian Performance of Construction Index (PCI).

The index, compiled monthly by the Australian Industry Group (Ai Group) and Housing Industry Association (HIA), gave an overall result of 56.0 points for June (readings above 50 indicate growth). While still in expansion, however, the figure represents a 0.7 point drop on May’s results.

"Australia’s construction industry enjoyed another buoyant month in June with house building and commercial construction both recording solid gains and engineering construction holding onto the gains experienced in April and May," Ai Group policy head Peter Burn says.

The slight 0.7 point drop in activity is mainly due to the current bi-polar nature of the apartment construction sector, which recorded a 20.2 point decline in June after a 13.2 point climb in May.

"The volatile apartment building sub-sector detracted slightly from total construction activity after very strong reported activity in May," Burn says.

"The immediate outlook for the construction sector as a whole is positive with new orders growing across the board. New orders for commercial construction have picked up noticeably over recent months after an extended period of weakness.

"In good news for the overall stability of the economy, the orderly easing back from the historically high peaks in apartment building is now being complemented by the long-awaited lift in commercial construction," Burn continues.

Representatives from the HIA say residential construction is experiencing a new operating phase and that the conditions are expected to continue for some time.

"After peaking during 2016, the residential building cycle has now entered a new phase, with activity edging back from the all-time high," HIA principal economist Tim Reardon says.

"While overall activity is still currently hovering at an elevated level, we anticipate that this new phase of the cycle will be characterised by a marked contraction in apartment building, while an easing in detached house building is likely to be far more measured.

"The contrasting conditions in the detached house and apartment markets are already clearly evident in this update to the Australian PCI," Reardon adds.

 

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