Out of the blue, Australia’s construction sector is expanding again.
The latest Performance of Construction Index (PCI) released by the Ai Group jumped by 5.6 points to 50.8 in April, indicating that activity levels are now improving.
It was the first reading above 50 in five months.
Like purchasing managers indices (PMI), the index measures changes in activity levels from one month to the next. Anything above 50 signals growth, while anything below that level means contraction -— so the higher the number the better.
But don’t think the rebound was driven by residential construction – it’s not. It was actually an enormous recovery in engineering construction with activity levels expanding for the first time in 21 months.
The subindex jumped by 9.9 points to 54.6, helping to offset weakness in other sectors.
“This was the first growth outcome since June 2014 and was accompanied by encouraging reports that higher infrastructure activity was helping to soften the impact of the downturn in mining and heavy industry investment,” noted the Ai Group.
Although a pleasing development, the news elsewhere was more circumspect.
Apartment construction contracted marginally, falling 2.1 points to 49.5, while housing construction came in at 45.2, up 4.1 points from March but still below the 50 level that signals a decline in activity levels.
The index measuring commercial construction also fell, dropping 5.4 points to 45.0, again signalling a contraction.
Suggesting that the weakness outside of engineering construction may persist, the new orders gauge — a forward indicator for future levels of activity — came in at 49.0, the sixth sub-50 reading in a row but 4.2 points higher that the reading seen in March.
The table below, supplied by the Ai Group, reveals the internal movements of the surveys components in April.
While questions will remain over the sustainability of the recovery seen in April, the reasonable headline figure continues a good run for construction-related data of late, particularly for the residential sector.
Capital city house prices are also accelerating, bucking expectations of a slowdown earlier in the year.