The seasonally adjusted Australian Industry Group/ Housing Industry Association Australian Performance of Construction Index (Australian PCI) increased by 4.5 points to 60.5 points in July.

This signalled the strongest pace of overall industry growth since the survey's inception in September 2005. The further upturn in industry conditions reflected expanding activity across all four major construction sectors with commercial construction and house building the major drivers of growth.

The rate of expansion in commercial construction lifted to its highest level in 12 years amid an increase in the number of projects entering the work pipeline. House building recorded its fastest pace of growth in 3½ years on the back of a solid backlog of work and ongoing strength in demand.

More robust conditions were also evident in engineering construction activity in July, with the sector's sub-index rising solidly in line with reports of increased levels of non-mining infrastructure work. 

The activity sub-index registered 58.3 points in July. This was 5.2 points above the level of the previous month, signalling a faster pace of expansion in July. This upturn was underpinned by more robust conditions in the house building, commercial and engineering construction sectors, combined with a return to growth in the apartment building sector.

New orders expanded in July for a fourth consecutive month. The new orders sub-index in the Australian PCI increased by 2.7 points to 64.6 points, eclipsing June's solid growth result and signalling the highest rate of expansion in new orders in the 12 years since the start of the survey.

In line with the continued expansion in aggregate industry demand, deliveries of inputs from suppliers continued to increase in the Australian PCI, and at a faster pace. The supplier delivery index increased by 6.4 points in June to 59.2 points. This indicated the highest rate of growth in almost three years.

Construction employment expanded for a third consecutive month with the employment subindex within the Australian PCI registering 59.0 points in July. This was an increase of 4.8 points from June, indicating a faster rate of expansion in the month.

The Australian PCI input prices sub-index registered 73.6 points in July. This was an increase of 7.4 points from June, indicating that cost pressures in the construction of building projects intensified during the month. This increase in cost pressures was driven by robust demand for construction materials, escalating energy input costs and supplier price hikes related to solid gains in commodity prices in July.

Ai Group head of policy, Peter Burn, said: "The national construction industry has continued its strong run with infrastructure work, a resurgent commercial construction sub-sector and ongoing healthy levels of activity in residential building combining to more than offset the further wind-down of mining-related work. The buoyancy of the sector is evident in strong levels of current activity and employment growth and growing order books.

"The long-awaited pick-up in commercial construction seen over the past three months is particularly welcome in light of the anticipated wind-down in apartment building from the very high recent levels and suggests that the national construction industry will continue to play a leading role in the economy for some time to come."