Australian PCI®: Construction grows amid supply and price pressures

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) improved by 3.1 points to 56.5 in March, indicating further recovery in activity across the construction sector after the summer holiday periods sharp fall (readings above 50 indicate expansion in activity, with higher results indicating a faster expansion).

Australian PCI® – Key Findings for March 2022:

• The activity indexes for all four sectors in the Australian PCI® expanded in March, building on February's return to better business conditions. Activity rose and improved in apartments (up 6.3 points to 56.3) and commercial construction (up 4.5 points to 63.3), while engineering (down 2.7 points to 53.6) and housing (down 4.1 points to 54.2) both moderated compared to the stronger growth in the previous month.

• The new orders index in the Australian PCI® lifted slightly in March (up 0.3 points to 55.7), indicating expanding and improving demand, while supplier deliveries contracted for a ninth consecutive month (up 1.3 points to 43.2).

• The index for input prices moderated slightly but continued to indicate ongoing upward pressure (down 1.0 point to 94.6), marking more than a year of extremely elevated results. The selling prices index marked 17 months of expansion but eased from February's series high (down 1.6 points to 85.2).

• The average wages index eased back from a series high in February (down 0.9 points to 76.6) but recorded a seventh month of elevated wages pressures. The employment index jumped to a series high in March (up 11.8 points to 66.1) and respondents to the Australian PCI® reported plans to increase employment in the coming months.

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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.