Growth Returns to the Construction Sector

constructionindustry

After a downward trend lasting four months, the Australian PCI (Performance of Construction Index) has increased 5.6 points up to 50.8.

This moves the sector from a contraction status to expansion, while engineering construction (which was previously dragging the sector down as the mining industry transitioned from construction to operation), experienced a “surge”. This is according to Peter Burn, Australian Industry Group head of policy, who explained that the growth has offset falls in new orders and activity in the commercial and residential sub-sectors.

While mining-related projects are winding down, engineering construction has been a drag on the performance of the sector for most of the last two years. In April, engineering construction performed the strongest- up to 54.6- an increase of 9.9 points and the first growth it has had in almost two years.

Mr Burn described the April turnaround as a reflection of a “…renewed pipeline of transport infrastructure projects”. He also said that while this is unlikely to completely offset further falls in work related to mining, the outlook for commercial and residential construction showed a lift this week as the Reserve Bank reduced the cash rate.

Diwa Hopkins, an economist for the Housing Industry Association, said the PCI indicates that residential construction is easing back from the highs of last year.

He said that the cut to the official cash rate will support new home building over both the near and medium terms. However, “…the level of building is still likely to be shy of what occurred in 2015”. Mr Hopkins also said that the development is encouraging and needs to be sustained as the construction industry faces more challenging prospects for growth elsewhere.

For the first time in three months, employment grew in the construction industry, although overall wage growth remained the same.

Sources: Construction Industry News, ABC News.

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