The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) increased by 1.5 points to 54.3 in January 2018, indicating industry-wide growth for a 12th consecutive month and at a slightly faster pace than in December 2017 (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase).
Ai Group Head of Policy, Peter Burn, said: "January marked a full year of monthly growth in Australia's construction sector according to the Australian PCI®. Activity lifted across the industry with the strongest contribution coming from commercial construction. House builders and engineering constructors also reported healthy gains while apartment builders enjoyed a second consecutive month of relief from the falls in activity experienced over much of 2017. While new orders only lifted modestly in January, further employment growth is a strong sign of an industry still confident over its near-term outlook. The pace of wages growth lifted again in January whereas non-wage costs also rose but at a less frantic pace than in recent months. Selling prices rose slightly, pointing to continued pressure on margins," Dr Burn said.
HIA Senior Economist, Shane Garrett, said: "Both house and apartment building activity expanded again during January 2018. Even though new home building activity has retreated from its peak, it still remains very elevated by historic standards. A considerable proportion of these new apartments have been delivered onto the rental market – helping to bring rental inflation to a 24-year low during 2017. This is good news for those who rent rather than own their homes," Mr Garrett said.
Australian PCI® – Key Findings for January:
- All four construction sub-sectors expanded in January, with commercial construction the strongest performing area of industry activity (up 7.4 points to 58.9). House building activity continued to expand but moderated for a second month (down 2.5 points to 52.0), while apartment building's marginal rate of growth was unchanged from December (50.7 points). Engineering construction's rate of expansion slowed (down 3.4 points to 53.5).
- Overall construction activity was largely unchanged at 54.5, with its continued expansion associated with further growth in deliveries from suppliers (down 0.5 points to 52.9). The new orders sub-index returned to growth after drifting into mildly negative territory in December (up 2.6 points to 51.8), revealing an improvement in demand.
- The employment sub-index accelerated to its fastest pace in six months (up 3.3 points to 58.0), while capacity utilisation hit a record high of 83.4% – its highest since at least 2008 when this data series began.
- The input prices sub-index retreated from December's nine-year high but remained elevated (down 8.3 points to 74.4), while growth in wages continued (up 0.4 points to 64.3). The selling prices sub-index increased by 0.3 points to 58.9, suggesting that cost pressures are being passed on, but not broadly given strong market competition.
Source: Ai Group