Construction activity recorded a moderate growth in September by 7.5 points to 53.1 points, according to the Australian PCI Index.
According to the Australian Industry Group – HIA Performance of Construction Index, firms surveyed cited a pick-up in new home starts and increased work from the mining sector as among the major factors underpinning the lift in activity.
Ai Group’s associate director of economics and research Tony Pensabene said the Australian PCI result for September reflected recent broad economic trends.
“Solid business investment, the mining boom and increased public sector demand are supporting growth in commercial and engineering construction, while the recent modest upturn in approvals has flowed into higher house building activity in September. Concern about a further interest rate rise is however creating uncertainty about future prospects given the already appreciable easing in overall activity since last year.
“An added concern is the continued high growth in construction costs which has the potential to further erode margins and inhibit client sentiment.” he added.
By sector, the lift in September was driven by stronger growth in commercial construction and a pick-up in house building activity. Commercial construction was the best performing sector in September, with the sub-index increasing by 8.3 points to 59.2, the highest level of the past thirteen months.
According to the index, House building activity increased by 6.5 points in September to 54.8, this follows a decline in August and indicates renewed momentum. In contrast, apartment building activity continued to contract in September, the index remaining at a particularly subdued level of 30.7.
HIA’s executive director of housing and economics Simon Tennent said the recovery in the September Australian PCI was encouraging, following a disappointing August result.
“Still of major concern for the construction industry, however, is that many areas of Australia not enjoying a direct benefit from the resources boom are beginning to feel the pinch from higher mortgage rates.
“The dampening influence of higher interest rates on activity, however, remained a concern for many firms. Activity and new orders expanded, leading to higher growth in deliveries and an upturn in employment,” Tennent concluded.
Meanwhile, new order indexes rose across all construction sectors in September, although only orders received for engineering and commercial construction work registered a positive rate of growth (above the 50.0 mark).
For commercial construction, the index stood at 56.2, to be 15.2 points above the index reading for August. More stable demands is signalled for the house building sector with the index rising by 1.9 points to 49.6. While the apartment sector index was the lowest of all sectors at 40.2, it was 11.7 points higher than August.
By Kathryn O’Meara
