Strong Housing Construction Fails To Drag Australia's Building Industry Out Of The Mire

Getty/Mark Thompson

It seems that like the Australian economy as a whole, Australia’s construction industry is broken up into different sectors running at different speeds.

That can be seen with the release this morning of the Australian Industry Group (AiG) and Housing Industry Association (HIA) Performance of Construction Index (PCI) showing that the overall sector is still in contraction even though house building is growth strongly.

Coming in at 46.7 this month, the PCI was up 0.8 points but still below the crucial 50 expansion/contraction zone.

Overall, even though the industry as a whole looks weak with new orders for engineering tanking and commercial falling, the RBA will be pleased that “house building was 54.4 and apartment building increased 7.0 points to 64.9.”

Also encouraging – and key to the transition in the economy – was the outlook for employment in the sector, even though it might be characterised as less bad rather than positive with the AiG noting: “There were reductions in the rate of contraction in employment (up 3.8 to 47.1)”

HIA chief economist Harley Dale said:

“We can take some heart from the latest Australian PCI® results. A contraction in engineering construction is hardly surprising, but commercial construction is very close to expansion mode, house building continues to expand, and apartments posted their best result in seven months. Further growth in residential construction activity in 2014 will be important for the Australian economy given the positive flow-through such expansion has to segments of Australia’s manufacturing, supplier, and retailing sectors.

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