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Australian PCI: overall construction declined in April

07 May, 2014

Although there were improvements across house and apartment building, the overall performance of the construction sector slipped again in April.

The latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) remained in contractionary territory at 45.9, a drop of 0.3 points (readings below 50 indicate a contraction in activity).

Commercial construction fell 10.8 points to 45.7 with patchy economic conditions affecting major commercial activity. Engineering was also weaker, falling 6.3 points to 39.2. The new-orders sub index, which is an indicator of future activity, was down 1.7 points to 46.6.

"The deepening slide in engineering construction is overshadowing the growth in residential building activity and the tentative recovery of commercial construction as seen in the expansion in April of new commercial construction orders," Australian Industry Group Director - Public Policy, Peter Burn, said.

"While there are some promising new engineering construction projects in the resources sector such as the West Pilbara Iron Ore Project boosted by the recent announcement by Aurizon and Baosteel Resources, the pipeline of large resources and energy projects is clearly drying up.

"Against this background, the commonwealth budget provides a timely opportunity to boost non-mining infrastructure investment and address business concerns about an excessive withdrawal of public sector demand."

Housing Industry Association Economist, Diwa Hopkins, said: "The continuing success story of the Australian PCI in 2014 is house building, with the segment expanding for eight consecutive months.

"Acceleration in the rate of expansion during April also provides cause for further optimism. It is also encouraging to see that after experiencing three consecutive months of contraction, the apartment building sub-index has returned to expansionary territory in April.

"The residential construction sector has a large reach into the broader domestic economy and it will become increasingly important in 2014. This is especially the case given the return to contractionary conditions experienced in the wider construction sector, a situation that has prevailed in 2014 thus far."

Australian PCI Key Findings for April:

  • The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) has recorded its fourth consecutive month of contraction with a drop of 0.3 points to 45.9 in April to remain below the 50 point level separating expansion from contraction.
  • Across the sub-sectors: House building rose 3.8 points to 54.6, apartment building was 12.3 points stronger to reach 57.9, commercial construction dropped 10.8 points to 45.7 while engineering construction fell 6.3 points to 39.2.
  • The new orders sub-index recorded 46.6 in April.
  • Input prices were lower but the index remained high at 68.4.
  • Construction employment was also weaker (43.3).

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