In this edition of the Data Wrap we briefly review the latest data releases in respect of construction activity, the labour market, wages and the Local Government Price Index.
Construction activity rises to record level
Data released by the ABS yesterday shows that the construction industry in South Australia remains in good health overall. The total volume of construction work done in trend terms rose by 6.5 per cent in the June quarter to reach a new record level (at least for the current data series which stretches back 30 years). Over the year to the June quarter construction work done was up a hefty 24 per cent. In comparison, construction activity at the national level rose by 2.0 per cent in the June quarter and was up 9.0 per cent through the year.
A further positive sign is that the lift in construction activity for South Australia has been broadly based, with there being strong rises over the past year in both engineering construction (28 per cent) and building construction (21 per cent). In terms of the latter there have been large rises in both non-residential building and residential building (up 26 and 17 per cent respectively, in seasonally adjusted terms).
Labour market conditions remain stable
The July 2018 Labour Force Survey results – released by the ABS last Thursday – were relatively benign. The state’s trend unemployment rate remained unchanged at 5.6 per cent. While an additional 1,049 jobs were created in July, and there was no change in the number of unemployed persons, these movements were insufficient to move the unemployment rate. Similarly, both the state’s participation rate (62.8 per cent) and employment to population ratio (59.3 per cent) remained unmoved.
A similar story applies nationally, with Australia’s trend unemployment rate holding steady at 5.4 per cent in July. There was little change across the states and territories, with only Western Australia and the Northern Territory recording movements in their trend unemployment rates (small declines of 0.1 percentage points respectively).
While there was little noticeable change in South Australian labour market conditions in July, there has been considerable improvement over the past year. Total employment rose by 2.2 per cent through the year to July, easily outpacing expansion of the civilian working age population over this period (0.6 per cent). Such robust employment growth has helped lower the state’s unemployment rate by 0.6 percentage points over the last year, bringing it near the national figure.
Wages growth remains sluggish
A couple separate data releases over the past week indicate that improvements in labour market conditions have still yet to translate into any meaningful upward pressure on wages.
The latest average weekly earnings report from the ABS indicates that average ordinary time earnings for full-time adults in South Australia was $1,447.80 in May, which is unchanged from a year earlier. The corresponding national figure was $1,586.20, which was up 2.6 per cent over the year.
Meanwhile, the Wage Price Index (WPI), which specifically measures inflationary pressures associated with wages and salaries, indicates that wages growth remains subdued and stable in both South Australia and nationally. In original terms, the WPI for South Australia rose by 2.1 through the year to the June quarter 2018, which is equivalent to the rise recorded over the previous year. The corresponding national WPI also rose by 2.1 per cent over the last year, which is a marginal improvement from growth of 1.9 per cent over the previous year.
Local government price inflation accelerates in 2017/18
The latest quarterly and financial year results for the Local Government Price Index (LGPI), released by the SA Centre for Economic Studies today, show that price inflation faced by the local government sector in South Australia accelerated in 2017/18. The LGPI rose by 2.9 per cent in 2017/18, up from 1.8 per cent in 2016/17. Price inflation faced by households also picked up over this period, although not to the same extent, with growth in the Adelaide Consumer Price Index rising from 1.5 per cent to 2.3 per cent over this period.
The latest annual result for the LGPI is the largest rise since 2011/12. The acceleration in price inflation faced by the local government sector in 2017/18 was brought about by price rises for construction works such as road and bridge construction, energy costs (e.g. electricity, gas and automotive fuel), and certain business services. There was some unwinding of these price movements in the June quarter 2018, especially for construction, which resulted in the LGPI showing no change for the quarter.