Construction sector at its strongest since last year, data reveals

by Julia Corderoy08 Sep 2014
The month of August saw the construction industry experience its strongest performance since November last year, and the second strongest since April 2010.

According to the Australian Industry Group’s (AiG) Performance of Construction Index, the national construction industry expanded its growth momentum for the third consecutive month last month, and at a faster pace than July.

Growth in activity occurred across most major sectors of the industry. However, AiG group director public policy, Peter Burn said the result is carried by solid performance in the residential construction sector.

"The construction industry is continuing to rebalance away from the large projects that have lifted mining and minerals export capacity and towards the residential and commercial construction sub-sectors. 

“The combination of low interest rates and strong gains in asset values is underwriting continued strength of apartment and house building,” he said.

Apartment building was the best performing sector, increasing by 13 points to 64.9 points in the Index. Housing construction increased by 7.7 points in August to 60.9 points – rising to its highest level this year. 

The solid momentum in August flowed through to employment, with the Index revealing construction employment recorded a second consecutive month of growth, and rose 2.4 points from July. The industry also experienced continued wage growth during August, albeit at a slower rate, with the wages sub-index decreasing 1.8 points over the month, but still remained in “expansion” territory at 60.3 points. 

Housing Industry Association Economist, Diwa Hopkins said this is good news for the broader economy too.

“The labour market has been a key area of weakness in the wider economy. The labour-intensive nature of construction means that growth in this sector and the associated job creation can make a significant contribution to improving broader labour market outcomes," she said.    

The Index also revealed home builders indicated that customer enquiries and buyer confidence were relatively solid in the month, contributing to further rises in new construction.  Impediments such as a lack of public sector tenders and a decline in mining-related activity were cited as the main constraints on construction activity.