Australian Construction Climbs Again in November

Major infrastructure projects have yet again bolstered Australia’s construction industry, as engineering construction climbed for the 10th straight month in November.

The Australian Industry Group and Housing Industry Association Performance of Construction Index (PCI) surged 4.3 points to 57.5 points in November – above the 50-point reading indicating an expansion in activity.

Engineering construction remained the strongest performer of the other construction sub-sectors (house, apartment, engineering and commercial) as the industry climbed 4.3 points to 57.5 to the index, with any reading above 50 indicating activity expansion while its strength is measured in numbers with greater distance from 50.

Engineering construction recorded an 11.5-year high with 64.1 on the index, remaining the strongest performer of the other construction sub-sectors (house, apartment, engineering and commercial). House building activity also strengthened, rising 8.2 points up to 61.3 points.

[Related reading: Engineering Work Continues to Buoy Australia’s Construction Sector]

Apartment building activity on the index lifted by 0.9 points to 47.7 points in November to signal a slight easing in the rate of decline, and commercial construction also recorded more robust conditions in November, registering 59.8 – a sizeable 9.7 points above the reading for October and signalling the sector’s fastest pace of expansion in four months.

"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,” Ai Group Head of Policy Peter Burn said.

“The well-established trend decline in apartment building continued as this sub-sector scaled back from the very high levels of recent years.

“With new orders also in positive territory, the sector looks like closing 2017 on a high,” he said.

Overall construction activity accelerated 7.9 points to 60, its strongest pace in the survey's 12-year history. This was helped by stronger expansions in new orders, deliveries from suppliers and employment.

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 was stronger.

“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," Garrett said.