The seasonally adjusted Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) registered 52.8 points in December (readings above 50 points indicate expansion).
This was down by 4.7 points from November indicating a slowing in the industry’s overall growth momentum in the final month of 2017. However, it marked the 11th consecutive month of expanding conditions for the Australian PCI®
December Australian PCI® data pointed to a moderation in the pace of activity growth across the industry. Demand conditions were also more subdued with the new orders sub-index drifting into mild negative territory (i.e. below 50 points) following eight months of growth.
December’s decline in aggregate industry demand led to a slower rate of increase in deliveries from suppliers. However, employment growth continued to hold at a relatively firm rate consistent with a solid backlog of work and scheduled project starts in 2018.
Across industry sub-sectors, engineering construction and house building remained the strongest performing areas of construction activity in December. However, the pace of activity growth in both sectors was well down on the solid increases recorded in November.
The rate of expansion in commercial construction was also slower in the month, although December marked the sector’s eighth consecutive month of stable or expanding activity amid stronger property investor demand and improving business conditions more generally in 2017.
Apartment building activity returned to positive territory after contracting for four consecutive months, although the overall rate of expansion in December was marginal.
House builders continued to point to support from a solid backlog of work, although there were reports of a softening in new orders and reduction in customer enquiries about house constructions in December.
Respondents active in major project work again cited the positive influences on activity from the upswing in government infrastructure spending and rising investment in major commercial building developments.
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.
