Construction Contracts but Signs Supply Strain Easing

Australian construction has contracted for a fourth month in a row, according to the Australian Performance of Construction Index.

The Australian Industry Group-Housing Industry Association’s PCI was down 1.4 points to 46.5 in September.

This is an increased rate of decline compared to August when the index lifted by 2.6 points to 47.9. Readings below 50 indicate contraction in activity, with lower results indicating a stronger rate of contraction.

Two of the four construction sectors—housing and apartments—were in deep contraction in September while activity improved in the commercial sector and was stable in engineering.

The PCI said demand-side pressures, including rising interest rates and economic uncertainty, were dampening consumer-facing construction sectors from elevated levels recorded during the pandemic.

“Supply constraints continue to inhibit growth but there are early signs of supply-chain pressures easing,” a spokesperson said, with the contraction in supply rising by 3 points to 48.6 points (seasonally adjusted).

“While delivery delays and supplier stock shortages continued to be reported across all sectors, more respondents noted an easing in supplies constraints compared to previous months.”

Construction employment also improved, up 7.2 points from August to 54.9 for last month.

PCI September 2022

^{Source: Australian PCI}

“The selling prices indicator grew again to 77.2. While input prices fell slightly at 88.6 the indicator remains higher than selling prices,” the spokesperson said.

“Capacity utilisation rose slightly to 83.2 per cent—it has been sustained at highly elevated levels since the end of 2020.

“Increased interest rates were a concern as they rose again in September.

“Builders reported lower customer demand due to higher costs for buyers and uncertainty around future increases.”