Construction a two-speed industry
Despite strengthening residential building, the national construction industry contracted for a fourth month in July, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) rising just 0.7 points to 47.1.
Reducing engineering activity continued to outweigh the positives across the residential building sub-sectors, reinforcing the two-speed nature of the industry (readings below 50 points indicate a contraction in activity, with the distance from 50 indicating the rate of the contraction).
All sub-indexes in the Australian PCI remained in contraction in July, including construction activity (down 1.0 point to 47.6) for a ninth consecutive month, and new orders (unchanged at 45.4), employment (up 2.0 points to 47.5) and deliveries from suppliers (up 3.6 points to 49.0).
Of the four construction sub-sectors, apartment building was the strongest performer once again in July, rising 9.0 points to 62.0, while house building was stable, declining 1.7 points to 50.0. Engineering construction activity contracted for a 13th consecutive month (down 2.2 points to 43.0) amid further drops in new engineering construction and investment. Commercial construction recorded a ninth consecutive month of contraction, declining a further 3.7 points to 45.2.
Ai Group Head of Policy, Peter Burn, said: "Continued strength in residential construction again failed to outweigh the weakness in engineering and commercial construction as the broad construction industry contracted further in July. Within the residential sectors there are distinct regional differences with positive comments from respondents from NSW and Victoria contrasting with less favourable reports from other states, particularly South Australia and Western Australia. The two-speed pattern of expansion in the apartment and house building sectors and contraction in the engineering and commercial construction sectors is well-entrenched and reflects the partial re-balancing of the national economy as investment in mining-related construction retreats."