Construction industry decline slowing: AIG

The Australian construction industry continued to decline in November but at a more moderated pace, according the latest report by the Australian Industry Group and the Housing Industry Association.

The performance of construction index increased 4.9 points to 39.6 in November, still short of the 50-point level that distinguishes contraction from growth.

The increase represents a reduction in the rate of decline of both house building and engineering construction but commercial construction and apartment building activity declined at a steeper rate.

"The construction sector remains very uneven with the residential and commercial construction sub-sectors considerably weaker relative to the resources-project linked engineering construction sub-sector,” says Australian Industry Group director of public policy Peter Burn.

“Commercial construction continues to contract and businesses completing projects related to the fiscal stimulus package are not finding sufficient private sector work to keep fully occupied.  While still far from satisfactory, the sector overall appears to be pulling back from the accelerating pace of decline reached in August and September," Burn says.

There were reports of an improvement in workflows from resource-based projects and a rise in customer enquiries in the house building sector linked to the positive influence of the recent interest rate reduction, the report found.

New orders again declined across the industry, although the rate of contraction was the slowest in six months. Consistent with this, falls in activity, supplier deliveries and employment all moderated, the report found.

Senior economist at Housing Industry Association Andrew Harvey used the report to call for further stimulus of the construction industry.

"[The report] again highlights the current fragile state of residential building with activity continuing to contract and looking a long way from an eventual return to growth,” Harvey says.

“There’s no hiding from the fact that house building activity has contracted for 18 straight months and apartment building activity has now contracted for 19 straight months.

“When you consider this long-lived decline in residential building activity alongside recent dismal building approvals it is clear that the federal government needs to urgently turn its attention to stimulating new home building in this country.”