Australian PCI returns to growth territory

According to the joint AiG/HIA Australian Performance Construction Index, the Australian construction industry has enjoyed its best monthly outcome for the first time since 2018.

The Performance Construction Index (PCI) recorded a 7.5 per cent increase to 52.7 in October, largely due to housing construction increases. The result sees a return to mild expansion for the Australian PCI, with improvement in construction industry conditions across all mainland states.

According to this joint survey by the Australian Industry Group (Ai Group) and the Housing Industry Association (HIA), readings above 50 indicate expansion in activity, with higher results indicating a faster expansion.

Activities improved across three of the four construction sectors, including house building, which was up by 4.4 points to 61.3.

Commercial construction activity dropped 6.3 points to 39.5, while the Australian PCI’s activity index rose to 4.84 in October, which suggests activity levels are close to stabilisation.

Apartment activity (47.1) and engineering activity (44.1) remained in contraction but both saw increases. Engineering in particular saw a 14.1-point-rise compared to September.

Western Australia and South Australia stabilised after recording results well above 50 points in September.

New South Wales and Queensland jumped to mild expansion, while Victoria’s activity index improved but stayed in contraction.

Ai Group head of policy Peter Burn said house building was the driving factor for October’s results.

“The expansion of the Australian construction industry in October was driven by further strength in house building and smaller declines in the apartment and engineering construction sectors while commercial building fell further behind,” Dr Burn said.

“Across the industry employment lifted modestly over the month. With activity restrictions in Victoria now easing and new orders rising strongly across the country, the near-term outlook is encouraging.

“There is a note of caution in that the improvement in the sector and elsewhere in the economy is still heavily reliant on wage and apprentice support measures and spurred along by exceptionally low interest rates.”

The HIA’s executive director for industry policy Geordan Murray said building approvals should lift in the coming months.

“The improvement in demand for detached housing has been instrumental in lifting the Australian PCI into expansionary territory for the first time since 2018,” he said.

“Low interest rates are combining with the HomeBuilder program and other fiscal stimulus measures to boost demand in this part of the market.

“The lift in the Australian PCI Housing New Orders sub-index in September and October implies that we should see further pick-up in building approvals over coming months with a lift in on-site building activity following soon after.

“These are positive signs that policy settings are working to generate employment throughout the initial phase of the economic recovery.”