Australian construction activity falls

Three of the four construction sectors – housing, apartments and commercial – saw a decline in activity in June. All saw activity fall significantly from the previous month.

Higher interest rates affected the residential sector in particular, with house-builders reporting a reduction in orders for the second month in a row.

Labour shortages and delays in supplier deliveries continued to constrain activity. Builders reported ongoing concern about increases in inputs (including fuel) and labour prices.

Capacity utilisation moderated slightly to 82.4% but remains elevated, as it has been for much of 2021 and 2022.

Jeffrey Wilson, director of research & economics at the national employer association Ai Group said: “The Australian construction sector faces significant pressure. Supply constraints for staff and materials are continuing to grow, with input prices setting a record in June. Housing, apartment and commercial construction activity all declined further into contraction this month. The effect of rising interest rates was evident across house building and apartments as builders reported a drop in enquiries and new orders.”

Housing Association Australia senior economist Nicholas Ward commented: “Materials and labour shortages continued to weigh on home building in June. These constraints have resulted in increases in the cost of construction and extended build times. Demand for new detached homes and renovations has been exceptionally strong during the pandemic. There is a record volume of detached houses under construction, with more work entering the pipeline each month. With this large volume of work to be done, builders can expect to be at capacity in 2022 and 2023.”

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