After a minor rally in the middle of the year, the Australian construction industry has felt the effects of the Victorian COVID-19 lockdown in the latest AiG/HIA joint survey.
The Australian Performance Construction Index (PCI) has had its improving July figures cut short after dropping by 4.8 points to 37.9 in August.
Victoria’s Stage 4 restrictions and other border closures around the nation have adversely affected builders and reduced confidence, with construction activity down 14.5 points to 31.1 points.
Declines were also seen in the new orders index, which declined by 8.4 points to 35.1, despite earlier improvements in July.
According to Australian Industry Group head of policy Peter Burn, Victoria was a major aspect of the downward August results.
“The sharp fall in activity in Victoria was a major factor in the downturn while border restrictions in other states have hampered builders and constructors who are reliant on interstate supplies and the availability of tradies from across borders,” he said.
“Businesses in the industry have been watching their order books closely for some time and the further decline in orders in August will be a major concern both for their businesses and for their employees and suppliers.”
Activity and new orders across all four construction sectors also fell, including apartment building activity (down 11.1 points to 22.8), engineering construction activity (down 18.5 points to 27.0), commercial activity (down 9.6 points to 32.4) and housing activity (down 9.6 points to 37.4).
The average wages index was up by 6.1 points to 53.5, while the employment index saw a 4.7 point rise to 46.1 points.
“Demand for apartments is likely to be constrained until population growth returns,” Housing Industry of Australia’s economist Angela Lillicrap said.
“The HomeBuilder program will bolster activity in the detached house segment, but the broader softening in new orders highlights the risks facing the residential building sector.”
August 2020 marked the 24th consecutive month of contraction in the Australian PCI.