Abrupt disruptions to onsite activity and supplier activity have stunted Australia’s construction industry in July.
COVID-19 lockdowns across much of the country last month have caused the construction sector to contract, according to a monthly national performance index.
The Australian Performance of Construction Index, which is produced by the Australian Industry Group and Housing Industry Association each month, fell from 55.5 in June to 48.7 in July.
The 6.8 month on month fall from June’s figure indicates the first fall into contraction since September 2020 after nine months of expansion.
Overall construction activity (-14.4 points) and supplier deliveries (-7.6) fell significantly from last month and now sit well below their 12-month averages respectively.
The report explains that the downturn is due to the sudden interruption to the sector as a result of the COVID-19 lockdowns which were enacted in both Victoria and New South Wales in July.
Major construction sectors such as house building and commercial construction activity also slowed in July and were down 3.1 points and 0.1 points respectively although both sector’s monthly index figures (54.1 and 52.9) revealed both industries are still expanding.
Any measurement in the index above 50 suggests the industry is still expanding, while numbers below that mark indicate contraction.
The contraction across the construction industry follows months of boom conditions which culminated in record highs back in March this year.
The outlook for the ensuing months will depend heavily on the ability to contain COVID-19 outbreaks across the country and the subsequent easing of restrictions, according to AI Group Head of Policy, Peter Burn.
“With Australia’s two largest states affected by COVID-19 outbreaks and associated restrictions, the construction industry slipped into contraction in July after a robust nine-month expansion,” he says.
“The negative national result masked continued growth outside of NSW and Victoria and further expansions in both house building and commercial construction.
“The outlook over the next couple of months will depend heavily on the paths of the COVID-19 outbreaks and the extent of restrictions.”
HIA Chief Economist, Tim Reardon, says while restrictions have impeded on the industry’s ability to undertake work, there is a vast amount to commence once the industry is able to do so.
“The Australian PCI was dragged into negative territory for the first time in nine months following restrictions imposed to onsite building in NSW,” he adds.
“Despite these lockdowns, there remains a record volume of new detached home building and renovation work to be undertaken when restrictions ease. For builders in other regions, their main challenge remains keeping up with the large volume of work.
“Capacity constraints will remain a major challenge for at least the rest of this year. The exception to this is apartment construction, which continues to feel the adverse impact of constraints on migration.”
Other findings of the index were that employment across the sector continued to rise (up 2.5 points to 60.8) despite the lockdowns, and selling prices fell by 6.7 points, though they had reached record highs last month.