Construction growth eases in November: PCI

The overall lift was due mostly to a continued rise in apartment building in recent months

The national construction industry continued to expand marginally in November, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) dropping 1.4 points to 50.7.

According to the Ai Group/HIA, readings above 50 indicate expansion in activity, while the distance from 50 indicates the strength of the increase. Growth has now expanded for the fourth month in a row, as of November.

A continued rise in apartment building saw a slight lift in the overall construction sector in November despite falls in house building plus commercial and engineering construction, said Ai Group head of policy, Peter Burn.

Apartment building activity again expanded solidly, despite falling 3.4 points to 69.0, while house building contracted for a second month, but growing 1 point to reach 48.

Engineering construction contracted for the 17th month in a row, but its rate of decline moderated for a second month (up 1.9 points to 46). Commercial construction declined from its recent moves towards stability, falling 2.7 points to 46.3.

There were rises in current activity and new orders in apartment building - in contrast to the other three sub-sectors, which contracted for the second month (down 1.4 points to 48.1), while new orders slipped slightly into negative territory to end three months of growth (down 3.7 points to 49.8).

With new housing approvals falling, plus mining and energy-related engineering construction on the decline over the past few months, Mr Burn said the health of the construction sector is likely to depend on whether there is a lift in commercial construction and civil engineering work in the coming months.

“In this context, the decline in new orders in November is somewhat sobering,” he said.

HIA chief economist, Harley Dale, added that the story for 2016 is persistently strong, rather than just growing construction activity in the residential sector, but that there was no compelling evidence of an emerging recovery in non-residential construction.

“We need to be seeing evidence of a rebound in the non-residential sectors sooner rather than later. Governments could perhaps give some further thought as to how they might assist with that transition,” he said.