Ai Group Construction Index

The Australian Performance of Construction Index, called Australian PCI, is a monthly diffusion index of builder conditions. It tracks breadth of change across firms, not dollar volumes.

Ai Group has published it with HIA since September 2005, from a national sample in all states and sectors. The sample has no disclosed standalone count, and each firm is grouped by main activity under ANZSIC 2006. It covers detached houses, apartments, non-residential buildings, and heavy and civil engineering.

Sector weights come from ABS industry output, while ABS work-done figures sit in a separate context box. A reading of 50 marks no change, above 50 expansion and below 50 contraction.

Reference month M is released in the first week of month M+1, within days of collection. December and January are issued as one combined result, with no separate January release. Standalone releases carry no stated clock time.

Standalone releases ended with November 2022. From February 2023 the index continues as a sub-indicator inside the Australian Industry Index with no separate dates. The successor is published on the first working Wednesday, or the next working day on a national holiday.

Each pack shows the headline, components, sector indexes and a 12-month average. It adds supplier costs, charged prices, wages, capacity use, charts, a summary and definitions. An ABS box sits apart.

The headline moves with 4 diffusion inputs, while sector and cost data explain uneven conditions.

• Activity: captures month-on-month change in overall construction work reported by builders.

• New Orders: captures change in incoming new work and often leads activity over the next 3 to 6 months.

• Supplier Deliveries: captures change in deliveries of inputs from suppliers, from delays and shortages to improvement.

• Employment: captures month-on-month change in construction employment reported by firms.

• Sectors (House building, Apartment building, Commercial construction, Engineering construction): show conditions for detached houses, apartments, non-residential work and heavy engineering.

• Costs and capacity (Input Prices, Selling Prices, Average Wages, Capacity Utilisation): give side context on margins, wage pressure and capacity use outside the headline.

In September 2022 (published October 6, 2022) the headline fell 1.4 points to 46.5, a fourth straight contraction at a faster pace. Activity fell 4.2 points to 42.0 and new orders fell 8.0 points to 43.0. Employment rose 7.2 points to 54.9 and deliveries rose 3.0 points to 48.6, while commercial activity rose 13.3 points to 59.1. House building fell 5.8 points to 27.5 and apartments fell 12.5 points to 25.0, while engineering stood at 50.0, down 9.1.

Input prices stayed high at 88.6, down 4.0, against selling prices at 77.2, up 8.7. Wages stood at 72.7, down 4.9, and capacity use at 83.2%, up 0.6. Read distance from 50 first, then split the picture by sector.

1. Classify: group each firm by main activity under ANZSIC 2006 into 4 sectors.

1. Diffusion: build 4 diffusion indexes for activity, new orders, supplier deliveries and employment from monthly responses. No response formula is disclosed.

1. Combine: combine the 4 with varying weights that sum to 1, with numeric weights undisclosed, into a raw score. Sector weights come from ABS output.

1. Adjust: seasonally adjust headline and components by ABS method, with factors set for the COVID break. Show sectors as Henderson 13-month trends, with later months revising trends.

1. Read: compare to 50, where above 50 means expansion, below 50 means contraction, and distance from 50 shows strength. For illustration only with equal 0.25 weights, 60, 55, 50 and 58 give 55.75, or about 55.7 adjusted, meaning expansion by 5.7 points. The 50 line stays fixed while seasonal and trend outputs revise.