Construction sector reaches 10-month high

Deliveries of building materials also reached a 20-month high, according to figures from the Australian Industry Group (Ai Group) and the Housing Industry Association (HIA).

The two industry bodies released the latest Australian Performance of Construction Index (PCI) on 7 July, which measures changes in activity levels across the sector each month.

The PCI for last month rose to 53.2, up 6.5 points from May. A reading above 50 points indicates that construction activity is generally expanding.

All construction sub-sectors – houses, apartments, commercial and engineering – reported increases compared to the previous month.

“The construction sector hit a sweet spot in June with the bounce in the Australian PCI driven by growth across all of the sub-sectors and with solid gains in activity, employment and new orders,” Ai Group head of policy, Peter Burn, commented.

“The residential sub-sectors of house and apartment building were the standout performers both in current activity and in new orders, suggesting they are on track to continue their expansionary run over the near term.

Engineering construction activity increased in June by 7.3 points to 50.7 points, indicating a marginal overall rate of expansion – only the second time it has expanded since June 2014.

The PCI release attributes this to higher infrastructure activity levels helping to soften the impact of a downturn in mining and heavy industry investment.

Burn said although making positive contributions to the sector’s growth, the commercial and engineering construction sub-sectors both recorded a drop in new orders in June, providing “less cause for optimism about the first quarter of the new financial year”.

In line with aggregate industry demand, deliveries from suppliers rose following falls in the previous two months.

The supplier delivery index increased by 4.6 points in June to 52.9 points, the highest reading in the past 20 months.

HIA chief economist Harley Dale said new residential construction remained the “powerhouse” of the economy.

"At the same time, non-residential construction has some spark to it, but the breadth of recovery is still proving elusive," he said.

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