Australia's Construction Industry Improves To A 3.5-Year High, According To September PCI

Australia’s Performance of Construction index has improved to a 3.5-year high thanks to growth in the house and apartment building sectors.

Although the industry is still shrinking, the PCI increased 3.9 points to 47.6 in September – the highest reading since about May 2010. Readings below 50 indicate a contraction in activity.

Growth in new orders jumped a whopping 8 points to 51.9, which is the first time in 40 months that this sector has been above the 50 zone and thus expanding.

On a darker note, the employment market still looks weak, with construction jobs shrinking at the fastest rate in three months.

Caution makes sense with how the construction industry has been tracking in recent years and a sustained recovery, should it eventuate, should hopefully change the employment outlook.

Australian Industry Group Performance of Services Index

Australian Industry Group chief economist Julie Toth pinned the growth in housing and apartment activity on lower interest rates and improved buyer sentiment.

According to the Ai Group, businesses reported increasing levels of incoming work and new tender opportunities in September, while house builders reported an increase in enquiries and an improvement in homebuyer sentiment.

Activity in commercial and engineering construction continued to fall, but at a slower rate than in August, the Ai Group reported.

“The construction sector is closer to stabilisation than at any time since mid-2010,” Toth said.

“Despite these encouraging trends, it is clear that the industry continues to face a tough operating environment with impediments such as tight credit conditions and a lack of public sector building activity continuing to weigh on overall activity.”

Coming on top of the manufacturing and services indices last week, this is good news for the Australian economy.

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