The Australian Performance of Construction Index (PCI) decreased 1.4 points to 46.4 per cent in June, representing a steeper rate of contraction in construction activity compared to the previous month. Index readings above 50 points indicate an expansion in activity, with the distance from 50 indicative of the strength of the expansion.
Despite residential construction showing strong signs of expansion, with house building activity improving by 3.4 points to 51.7 points and the apartment building sub-sector recording a six-point increase to 53 points, this positive growth was offset by a 12th consecutive month of contraction in engineering construction and an eighth consecutive month of contraction for commercial construction.
Engineering construction activity decreased 3.3 points to 45.2 points, indicative of the continued winding down of resource-related construction as well as a lack of work on new major infrastructure projects. The drop in activity was less severe for commercial construction, which recorded a 0.3-point decline to 48.9 points. It was said that this reflected the “persistent weakness” of non-residential building approvals and commencements over the past year.
Australian Industry Group (Ai Group) head of policy Peter Burn said the results reinforced the need for “greater consistency and reliability in the development of pipelines of major infrastructure works across the country”.
Housing Industry Association (HIA) chief economist Harley Dale agreed it was crucial to “[rev] up the infrastructure investment engine”, adding that residential construction had been doing “the heavy lifting for the domestic Australian economy”.
“The housing components of the Australian PCI are consistent with that economic support continuing, but there is urgency now to foster a broader recovery – federal and state governments need to respond accordingly.”
A media statement issued by the Australian Construction Industry Forum (ACIF) ahead of the release of its first bi-annual, ten-year rolling industry forecast for 2015, suggested, however, that work demand might begin to pick up.
“Residential building alone is expected to increase to $82 billion from $74 billion … an increase of 11.2 per cent,” the statement read.
“Non-residential building will go down a little, but then is projected to go back up. It has fallen down 1.3 per cent over the 12 months to 2014–15 to settle at $35 billion, set to fall to $34 billion by 2016–17 then is forecast to increase after that.
“…the outlook is overall positive for work demand across all sectors, for most areas.”
The ACIF will be releasing its first forecast later this month, with the second 2015 forecast to be issued in November. ACIF forecasts are largely based on construction expenditure data sourced from the Australian Bureau of Statistics.
The Australian PCI is a seasonally adjusted national composite index jointly issued by the Ai Group and the HIA. The monthly report is based on the diffusion indexes for activity, orders/new business, deliveries and employment with varying weights.
The full Australian PCI report for June 2015 is available at www.aigroup.com.au