The national construction industry returned to growth in June, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) increasing by 6.5 points to 53.2 points in the month (50 points is the threshold that separates expansion from contraction).
This rise in the Australian PCI® in June signalled the industry’s highest rate of expansion in 10 months.
The rebound was driven by a solid upturn in the new orders sub-index which returned to growth (i.e. above 50 points) for the first time in eight months.
Conditions in June were also supported by an expansion in the activity sub-index (following falls in four of the past six months) and a lift in employment.
All four sub-sectors in the Australian PCI® recorded growth in June. House building gained further momentum with activity in the sector expanding at its highest rate in 30 months. In addition, apartment building activity recovered strongly following two months of contracting activity.
Engineering construction expanded for the second time in three months (albeit marginally), while commercial construction activity recorded growth in June after two months of declines.
Residential builders were generally positive in their assessment of business conditions citing an improvement in new orders, support from on-going projects and steady investor activity.
The rise in engineering construction activity was attributed by some businesses to an improving inflow of new infrastructure work, particularly transport projects in NSW.
Competition for work, however, remains strong with a number of respondents indicating a continuation of intense pricing competition and tight margins.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
