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Promise in the pipeline as construction stabilises

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The Australian construction industry returned to growth in September, gaining back the ground it lost in August, despite a two-week construction shutdown in Victoria.

The growth was reported by the Australian Performance of Construction Index (PCI) from the Australian Industry Group (Ai Group) and the Housing Industry Association.

The September PCI improved by 14.9 points to 53.3 – where scores above 50 indicate growth – after August suffered the worst results in 12 months.

Ai Group’s head of policy Peter Burn said the rise in construction activity simply reflected a less poor month compared to August.

“The bounce in the Australian PCI in September was largely due to many fewer builders and constructors reporting further falls in activity after the clear majority saw activity slump in August,” Burn said.

“Across the sector, the activity index for September still only reached 49.8 points with as many businesses reporting improved activity as reported further falls.”

Activity, supplier deliveries, house building and commercial construction were the only sub-categories to remain under a score of 50 – while still improving on August – as the rest returned to growth.

Burn said there were promising signs among the September results.

“Encouragingly, employment (score of 57) expanded, and new orders rose (58.9) after a precipitous drop in August,” he said.

“The very strong rebound into expansionary territory for engineering construction (61.8) more than offset further declines in house building (39.6) and commercial construction (41.2) with the apartment sector (50) treading water in September.”

HIA economist Tom Devitt said while home building declined in September for the second consecutive month, there was light at the end of the tunnel.

“This reflects the ongoing impact of lockdowns, especially in Victoria. There’s a significant pipeline of work yet to be completed (or even commenced) and still a healthy in-flow of new work entering the pipeline,” Devitt said.

“As lockdowns continue to ease, builders’ confidence will improve. This should ensure a rapid bounce back in activity once home building is allowed to commence again.”

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