House building consolidating as apartment building pulls back: Australian PCI

The Australian Performance of Construction Index has seen the industry's contraction slow over March, with the index up 2.0 points to 46.2 over the month.

The '50 point level' is that which separates expansion from contraction in the industry and it is the third consecutive month since the industry returned to growth that the index has been below this balance level.

The Australian Industry group director - public policy, Peter Burn, said that there was a consolidation of recent gains in the houe building sector. He also noted a recovery of commercial construction.

Despite these positive shoots, a pull-back in the previously bullish apartment building sector and a decline in engineering construction kept the index sluggish.

"As is the case with the broader economy, the rebalancing of the construction sector as mining-related activity slows still has a considerable way to go," said Burn.

He pointed to hopes that momentum can be maintained in the residential construction sectors, with attention to turning to required investment in non-mining related engineering construction.

Meanwhile, Housing Industry Association chief economist Harley Dale noted that despite the positive signs at the close of 2013, it was disappointing to see a full first quarter of 2014 in negative territory.

"The detached house activity component remains expansionary, if only just, and 2014 should be a healthy year for new home building activity," said Dale.

"What the sector and broader economy needs, however, is a sustained recovery in new home building commensurate with average construction levels being considerably higher over coming decades than those achieved over the past 20 years," he said.

"The prospect of achieving this outcome would be significantly bolstered by a national taxation reform agenda which included the removal of the excessive and inefficient taxes levied on new home building."

House building did fall over the month, by 1.4 points, however it remained above the 50 mark - at 50.8, suggesting a stabilisation. Meanwhile, apartment building declined 1.0 points to 45.6 points.

Commercial construction declined by 3.4 points, to 56.5 points, with engineering construction up 5.8 points to 45.5 points.