Decline in Australian construction eases

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (PCI) climbed 1.3 points to 43.9 in October, indicating a slight easing in the construction industry’s overall rate of contraction. Readings below 50 indicate contraction in activity, with the distance from 50 indicating the strength of the decrease.

Australian Industry Group head of policy Dr Peter Burn said: "Activity fell for the 14th consecutive month across the Australian construction industry in October. However, in what might be an early sign of the impact of recent interest rate reductions, there was an easing in the pace of decline in activity and new orders in the housing sector. Elsewhere, commercial construction activity remains subdued and concerns persist among engineering construction businesses about the current lull in infrastructure activity. This highlights the need to shore-up decision making on infrastructure projects to help inject additional stimulus across the wider construction industry.

Housing Industry Association senior economist, Geordan Murray, said: “The Australian PCI shows that the pace of decline in construction has eased slightly in October. The improvement in housing markets since mid-year, particularly in Sydney and Melbourne, is beginning to restore confidence. The improvement is clearly evident in the sub-indexes tracking construction activity and new orders for detached houses, but the indicators tracking the apartment sector continue to highlight that a significant contraction is under way. It will be some time before the residential building sector is once again expanding; in the meantime low interest rates will provide support.”

Once again, all four construction sectors in the Australian PCI contracted in October (in trend terms), with apartment building still the weakest performing sector in a 19th straight month of decline (unchanged at 34.7 points). The house-building sector's rate of contraction (up 1.8 points to 48.2) moderated in line with the slower rate of decline in new orders.

Across the major project sectors, engineering construction fell for a fifth month and at its sharpest rate in six years (down 2.1 points to 36.6) while commercial construction remained in negative territory for a 15th month.

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