Australian PCI®: Construction continues to grow despite supply and price pressures

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Peter Burn, Chief Policy Advisor at the national employer association Ai Group said: "Australia's construction sector continued to expand in April with growth reported in engineering and commercial construction and in house and apartment building. New orders grew at a faster rate while activity and employment continued to grow but at a slower rate compared with March. The industry is operating at very high levels of capacity utilisation and respondents pointed to difficulties in sourcing material inputs and labour as well as continuing price pressures. The rise in interest rates announced yesterday by the Reserve Bank and the further rises foreshadowed can be expected to ease demand growth somewhat particularly in the residential sectors. However, with both the federal and state governments adding to infrastructure pipelines, the ability of the industry to meet still higher levels of infrastructure activity will depend critically on the supply of skilled labour, including from abroad, and on the success of efforts to repair disrupted supply chains," Dr Burn said.

HIA Economist, Tom Devitt, said: "Home building activity continued to expand in April, supported by the tremendous pipeline of work that has been built up over the last couple of years. While an increasing number of houses are expected to start reaching completion from mid-2022, this pipeline will keep builders busy well into 2023. Supply issues will remain the salient constraint on builders this year, with the latest data continuing to reveal the magnitude of the input price pressures Australian home builders have been facing," Mr Devitt said.

Australian PCI® – Key Findings for April 2022:

• All four construction sectors – housing, apartments, commercial and engineering – continued to expand in April (see table below). However, the high rates of growth seen in previous months eased, particularly in the commercial sector.
• Escalating input costs affected builders urgently across April (down 0.2 points to 94.4), and the effects are expected to be ongoing. Supply disruptions, input price increases and labour shortages continue to be key construction inhibitors.
• House builders reported concerns about increased prices and potential interest rate increases leading to hesitation from customers. Capacity utilisation in the sector reached a series high of 86%, having been elevated for much of 2021 and 2022.

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Results above 50 points indicate expansion. 

Background: The Ai Group/HIA Australian PCI® is a seasonally adjusted national composite index based on the diffusion indexes for activity, orders/new business, deliveries and employment with varying weights. An Australian PCI® reading above 50 points indicates that construction activity is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline.

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Media Enquiries
Tony Melville (Ai Group) – 0419 190 347
Tom Devitt (HIA Economist) – 0439 514 656