▪ The seasonally adjusted Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) registered 55.3 points in August. This was down by 5.2 points from the previous month, indicating a slower rate of industry growth following July’s record high reading of 60.5 points (readings above 50.0 points indicate expansion with higher numbers indicating a faster pace of expansion).
▪ Across the four sub-sectors in the Australian PCI®, engineering construction and house building were the major drivers of growth in August. Reflecting the boost from greater government infrastructure spending on major works, engineering construction activity expanded strongly and at a rate that was broadly unchanged from the previous month. Continued strength was also evident in the house building sector, although its growth moderated from the 4½ year – high pace reached in July.
▪ There was stabilisation in commercial construction activity in August while apartment building returned to negative territory after a mild upturn in July, continuing the volatility of conditions in this sector over the past six months.
▪ For the construction industry as a whole, both activity and new orders continued to expand at relatively high rates in August despite easing in comparison with July. The sustained growth in aggregate industry demand led to the strongest expansion in deliveries from suppliers in almost three years.
▪ House building respondents to the Australian PCI® commented on a continuation of relatively firm demand conditions with support from a solid pipeline of projects. New land releases were also having a positive influence on activity for some businesses. However, apartment builders pointed to slower activity in the month due to softer new orders, lower enquiries and some easing in investor activity.
▪ The rise in engineering construction was again linked to the roll-out of various big-ticket transport infrastructure projects, particularly on the eastern seaboard.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
