Construction sector weakens for 16th consecutive qtr

There was a further weakening in the national construction industry in September

October 7, 2011

There was a further weakening in the national construction industry in September with the seasonally adjusted Australian Industry Group-Housing Industry Association Australian Performance of Construction Index falling 2.1 points to 30.

Further marked falls in activity, new orders and employment contributed to the sector remaining well below the 50-point level separating expansion from contraction for the 16th consecutive month. It was also the lowest reading on industry conditions since February 2009.

At the sectoral level, house building, apartments and commercial construction all recorded sharper declines in activity during the month.

Despite a further reduction in engineering construction, it remained the most resilient of the four broad sectors of the industry, with activity falling at its slowest pace over the past four months.

Australian Industry Group Director Public Policy, Peter Burn, says: "The construction sector continues to struggle in the face of subdued demand and low levels of investor and consumer confidence.

"The greater likelihood now being attached to a fall in interest rates is in part a response to these conditions. Lower interest rates would assist in reigniting demand for housing and commercial construction in particular.

"However, the extent of uncertainty hanging over the domestic and global economy points to a continuation of tough times for the industry. This is borne out by the ongoing weakness of the new orders across all the sub-sectors."

Housing Industry Association Chief Economist, Harley Dale, adds: "There is widespread evidence of accelerated weakness in residential and (commercial) building conditions since mid-2011 and today’s Australian PCI result confirms that this trend continued unabated in September.

"A majority of Australian PCI components contracted at a faster rate in September, amidst a deteriorating global economic climate which is adding a fresh round of fragility to consumer and business confidence here at home. Interest rate cuts are appropriate and justified and there is a compelling need for fiscal stimulus to boost new housing supply, which would also deliver a positive multiplier impact to the wider domestic economy."

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