Construction sector slows from record pace

The expansion in Australia’s construction sector continues to slow from a record pace earlier in the year, constrained by rising material prices and difficulty finding workers.

The Australian Industry Group/Housing Industry Association performance of construction index fell 2.8 points in June to 55.5 after hitting a peak in March.

Still, an index reading above 50 points indicates the sector is expanding.

“Australia’s construction industry continued its run of strong growth in June but the pace of expansion is slipping as it faces capacity constraints and rising input prices,” Ai Group executive Peter Burn said.

However, new orders remained at very healthy levels, indicating further expansion in the months ahead. 

“Employment continued to grow although its pace eased with the builders and constructors reporting increasing difficulty filling positions,” Mr Burns said.

Activity across house building, engineering construction and commercial construction rose in June, but activity in the apartment sector slipped.

HIA economist Tom Devitt said constraints on migration during the pandemic were hampering demand for apartments.

“This sector has been central to economic activity in Sydney and Melbourne for much of the past decade,” he said.

The Australian Bureau of Statistics will release building approvals data for May later on Monday.

There were a wide range of forecasts ahead of the figures, with uncertainty over what impact the end of the federal government’s HomeBuilder grants would have.

The HomeBuilder scheme officially ended in March, although the deadline to begin construction runs for an additional 12 months.

The ABS will also release its final retail trade figures for May.

The preliminary number released last month showed national spending was limited to a 0.1 per cent increase, dented by a 1.5 per cent drop in Victoria as a result of the start of its 14-day lockdown in Melbourne.

Looking ahead, Westpac economists expect the June result will include the full impact of the Melbourne lockdown, as well as the initial restrictions in Sydney that have subsequently extended into July.

Parts of Queensland, Western Australia and the Northern Territory have also endured snap lockdowns in the past week.

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