Ai Group - Australian Industry Group

12/07/2017 | Press release | Distributed by Public on 12/06/2017 20:51

Australian PCI®: Construction momentum builds in November

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Ai Group Head of Policy, Peter Burn, said: 'Activity in the construction sector which has been expanding for most of the year accelerated further in November as higher activity levels in both engineering construction and house building were backed up by a surge in commercial construction. The well-established trend decline in apartment building continued as this sub-sector scaled back from the very high levels of recent years. The granular sub-indexes in the Australian PCI® point to strong employment growth (November was the seventh consecutive month of expansion) and provide further evidence of a steady pick-up in wages. With new orders also in positive territory, the sector looks like closing 2017 on a high,' Dr Burn said.

HIA Senior Economist, Shane Garrett, said: 'With interest rates set to remain at record lows for longer than expected, the short-term outlook for new home building is stronger and today's Australian PCI® result for detached house building is evidence of this. Low interest rates and unprecedented migration from overseas are the two most important reasons why new home building reached the highest level on record last year. Looking further ahead, other factors - including regulatory restrictions - will force new home building to move lower over the next couple of years. The reduction will be most visible on the apartment side of the market,' Mr Garrett said.

Australian PCI®- Key Findings for November:

  • Across the four construction sub-sectors, engineering construction remained the strongest performer, recording an 11½-year high (up 3.2 points to 64.1) on the back of rising momentum in the roll-out of large-scale infrastructure projects. House building activity also strengthened due to continuing firm demand and support from a solid backlog of work (up 8.2 points to 61.3).
  • The rate of expansion in commercial construction lifted to its second highest level in 3½ years (up 9.7 points to 59.8), while apartment building contracted for a fourth consecutive month (up 0.9 points to 47.7).
  • Overall construction activity accelerated to its strongest pace in the survey's 12-year history (up 7.9 points to 60.8). This was associated with stronger expansions in new orders (up 3.1 points to 56.7), deliveries from suppliers (up 2.2 points to 56.4) and employment (up 2.9 points to 55.3).
  • The input prices (up 3.8 points to 78.8) and wages (up 2.4 points to 62.3) sub-indexes remained elevated in November. The selling prices sub-index increased by 6.3 points to 59.9, suggesting that rising costs are being passed on, but not broadly given strong market competition.

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Seasonally adjusted

Index this month

Change from last month

12 month average

Index this month

Change from last month

12 month average

Australian PCI®

57.5

4.3

53.7

New Orders

56.7

3.1

54.5

Activity

60.8

7.9

53.3

Employment

55.3

2.9

52.6

Houses

61.3

8.2

55.5

Deliveries

56.4

2.2

54.9

Apartments

47.7

0.9

49.0

Input Prices

78.8

3.8

72.8

Commercial

59.8

9.7

52.1

Selling Prices

59.9

6.3

56.2

Engineering

64.1

3.2

54.8

Wages

62.3

2.4

62.7

Capacity Utilisation (%)

79.2

0.2

77.1

Background: The Ai Group/HIA Australian PCI® is a seasonally adjusted national composite index based on the diffusion indexes for activity, orders/new business, deliveries and employment with varying weights. An Australian PCI® reading above 50 points indicates that construction activity is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline.

Media Enquiries:Tony Melville (Ai Group) - 0419 190 347Shane Garrett (HIA Senior Economist) - 0450 783 603