Australian construction ends financial year in the black

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The construction industry in Australia has remained stable for the final month of the financial year, according to the latest Performance of Construction Index (PCI) figures.

June -18-PCI-results

The monthly industry survey, compiled by the Ai Group and the Housing Industry Association (HIA), gave a reading of 50.6 points for the month of June (readings above 50 indicate growth). The result is a 3.4 point drop from April, but still positive news for the sector.

Across the four sub-sectors (commercial, house-building, apartment building and engineering construction) commercial construction was the strongest performer (up 1.1 points to 53.7), while engineering construction expanded at a slower rate compared to May (down 4.8 points to 51.0).

In the residential construction sub-sectors, apartment building remained the weakest performing sub-sector, contracting for a fourth consecutive month (up 1.6 points to 48.4) while house building activity returned near to stabilisation, down from May’s solid upturn (down 8.4 points to 50.2).

The Ai Group had mixed reactions to the news, noting the downturn in residential apartment construction but also the continued expansion in commercial construction.

"The run of expansion enjoyed by the construction sector all but paused as the financial year drew to a close," Ai Group head of policy Peter Burn says.

"The residential sub-sectors detracted from the industry’s momentum with apartment building continuing its orderly retreat from boom conditions and house building stable in June.

"Engineering construction was broadly stable in June while commercial construction grew slightly more rapidly. Construction sector employment fell in June for the first time in over a year," Burn says.

Representatives from the HIA remarked that the recent downturn in apartment construction was linked to recent changes in government policy.

"During June, house building expanded slightly while activity on the apartment side contracted for the fourth consecutive month," HIA senior economist Shane Garrett says.

"Apartment building activity is particularly sensitive to the restrictions on foreign investors which were tightened in recent state budgets in addition to more onerous APRA regulations with regard to interest-only loans."

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