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Construction shows positive movement in March: PCI



The Australian Performance of Construction Index (PCI) rose again after dropping significantly over the summer holiday season, indicating further recovery in activity across the construction sector.

Presented by the Australian Industry Group (Ai Group) and the Housing Industry Association (HIA), the seasonally adjusted Australian PCI improved by 3.1 points to 56.5 in March – where results below 50 points indicate contraction of the industry and those above 50 indicate expansion.

Ai Group chief policy advisor Peter Burn said sector continues to gain further ground with increased expansion of activity occurring in March.

“Commercial construction was the most rapidly expanding sector, and it was supported by solid gains in apartment building, house building and engineering construction,” Burn said.

Despite growth in house building and engineering easing from February, all other sectors reported expansion in March. The index for new orders rose by 0.3 points and employment jumped up to record a series high of 66.1 points.

The new orders index lifted slightly by 0.3 points to 55.7, indicating expanding and improving demand, while supplier deliveries contracted for a ninth consecutive month.

HIA Economist Tom Devitt said that the data reflects the continuing strong housing market conditions.

“This has been driven by the pandemic trend of homebuyers demanding more space and amenity,” he said.

Marking 17 months of continuous growth, the selling prices index eased from February’s series high, down 1.6 points from 85.2.

“Loans for the construction or purchase of new homes continued to sustain levels higher than pre-COVID,” Devitt said.

“The availability of land, labour and materials is the salient constraint on builders, rather than any absence of demand.”

“The associated affordability concerns in the detached market are likely to increase the appeal of units, townhouses and apartments, especially upon the return of overseas migrants, students and tourists,” he said.

Despite seeing general improvement in March, the ongoing supply disruption, escalating input costs and labour shortages have been impeding the sustainability of activity.

“Input price pressures, including freight costs, remained very high and managing the supply of inputs continues to present major hurdles,” he said.

Some respondents reported an increased focus on supplier diversification, while house builders reported concerns about increased prices resulting in customer hesitancy, and flooding has affected the ability to work in some areas.

With reports of difficulties managing sites with high numbers of people in isolation resurfacing during March as COVID infections grew, builders and constructors again highlighted the difficulties of attracting and retaining staff, particularly skilled staff.

“Unless further disruptive factors intervene, it appears likely that current activity levels will continue over coming months although the capacity to lift activity in the face of the supply pressures is becoming increasingly challenging,” Burn said.


Written by Danaya Malenda


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