RESEARCH

Housing fuels construction industry recovery

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THE construction industry recovery continues to accelerate with the Australian Performance of Construction Index recording the strong monthly result in the index’s history.

The Australian PCI rose 4.4 points to 61.8 in March and at the same time, the indexes for new orders, employment and supplier deliveries all hit record highs, as house builders nationwide scrambled to commence residential projects as soon as possible to meet the final HomeBuilder deadline.

Although conditions were positive, it was slower in apartment, commercial building, and engineering construction.

Ai Group head of policy Peter Burn said the already fast-paced improvement in the construction industry lifted another gear in March with a record rise. All four construction sectors trended higher led by house building and engineering construction.

The housing index rose 0.1 points to 70.2% and apartment was up 0.8 points to 53.4%. Meanwhile commercial building declined 1 to 56.2% and engineering increased 1.7 to 59.1%.

Employment also grew at the most rapid pace in the history of the series and wages rose faster than at any time since the Global Financial Crisis. Input prices surged due to a combination of high demand, supply constraints and rising freight costs for imported inputs. New orders went through the roof in March in part fuelled by the looming cut offs for the HomeBuilder program.

HIA economist Angela Lillicrap said the new highs being reached in housing activity are consistent with the other leading indicators.

“Activity is being driven to new heights by a combination of the HomeBuilder program, record low interest rates and shifts in population away from apartments and capital cities towards detached housing and regional areas. The record volume of work will see home building absorb workers from across the economy in 2021 and into 2022. The outlook for multi-units, unfortunately, will remain poor in the absence of overseas migrants, students and tourists,” Lillicrap said.

Burn said while this surge in new orders is very likely to fade from here on, work will continue to flow through construction supply chains for many months and will provide ongoing stimulus to the sector and the broader economy.

Seasonally adjusted Index this month Change from last month 12 month average Trend Index this month Change from last month 12 month average
Australian PCI® 61.8 4.4 45.9 House building 70.2 0.1 51.3
Activity 57.7 -3.7 44.3 Apartments 53.4 0.8 39.3
Employment 63.1 1.4 48.3 Commercial 56.2 -1.0 41.3
New Orders 64.7 14.6 44.6 Engineering 59.1 1.7 41.8
Supplier Deliveries 62.1 5.2 47.6
Input Prices 92.9 12.7 72.2
Selling Prices 71.8 5.5 47.9
Average Wages 71.8 7.4 55.7 Capacity Utilisation (% – seasonally adjusted) 81.3 3.6 74.9

 

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