As the commercial sector rebounded, the construction industry in Australia has expanded for the second consecutive month.

Published by Australian Industry Group in conjunction with Housing Industry Association, the Performance of Construction Index (Australian PCI®) edged up 0.8 points to 52.6 – the second month in the row the index has registered above the 50.0 mark separating improving conditions from deteriorating conditions.

Three of the four main sectors expanded as the index for commercial building surged 11.6 points to 61.2, apartment building (51.9) returned to expansion and housing (53.2) continued to expand, albeit at a modest pace.

Encouragingly, new orders rose in three out of four sectors and both employment and selling prices rose, indicating pressure may finally be easing on the sector’s workforce and profit margins.

Only the engineering sector (47.2) recorded deteriorating conditions.

Australian Industry Group Director of Public Policy Peter Burn welcomed the latest figures, saying the strengthening in activity, new orders, employment and selling prices were encouraging developments and adding that even the receding mining sector would free up capacity for infrastructure investment.

“In July, momentum in these sub-sectors ensured the overall construction sector remained in positive territory despite the ongoing slow-down in engineering construction as investment in mining-related projects fades,” Burn said.

“While house building has been strong for some time and apartment building is at healthy levels, the broadening of growth to include commercial construction is a welcome addition to the mix.”

Housing Industry Association Chief Economist Harley Dale agrees, saying the second consecutive expansion of the index represented a ‘tick in the box’ for the construction industry, strength within which would flow through to the broader economy and labour force.

Australia construction activity per sector

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Key points:

  • The latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) grew for the second consecutive month in July – up 0.8 points to 52.6 to be above the 50-point expansion level.
  • Activity (57.3) recorded its strongest level of expansion in ten months, whilst new orders (50.8), employment (51.3) and selling prices (54.0) all rose, albeit with pressure remaining on margins as input costs (65.7) continued to rise.
  • Across the sub-sectors: commercial (61.2) expanded at its fastest pace for six and a half years, whilst house building (53.2) and apartments (51.9) also expanded. Engineering construction fell 3.9 points into negative territory at 47.2.