Construction activity outside Victoria improves in September

05/10/2020

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) improved by 7.3 points to 45.2 in September, indicating a slower pace of contraction compared to August. (Readings below 50 points indicate contraction in activity, with lower results indicating a faster rate of contraction).

Across the states, the Australian PCI® indicates that construction activity is resuming at very different speeds, following the COVID-19 disruptions in Q2. Conditions improved in September in all states except Victoria, where PCI results sank to extremely low levels similar to April and May’s record lows.

Group Head of Policy, Peter Burn, said that while the Australian construction sector continues to contract, there are gathering signs of a tentative turnaround.

“Outside of Victoria, construction conditions improved marginally in September with more distinct gains in South Australia and Western Australia. In contrast, Victorian construction remained in a deep trough. Indexes for each of the subsectors improved with house building activity entering into positive territory for the first time since February,” he said.

“In the apartment and commercial building sectors the pace of decline eased significantly while engineering construction activity continued to slump though at a less severe pace. Looking forward to the months ahead, new orders were higher for house building and, while falling in other parts of the sector, declined at a gentler pace than over recent months.”

“In a further encouraging sign, the pace of decline in employment eased again in September. If hopes for easing of the Victorian restrictions and for further fiscal support in the Federal Budget are realised, the construction sector should be in a position to contribute to overall growth into 2021,” Dr Burn said.

HIA Economist, Angela Lillicrap said the Australian PCI® index for new orders in the house building sector has moved into expansion for the first time since February 2020, indicating that HomeBuilder is having a positive impact on the detached house market.