Construction sector contracts in March as conditions remain “fragile”: AIG/HIA index

The construction sector contracted further in March falling by 6.6 points to an index reading of 39 points.

Readings below 50 indicate a contraction in the industry with the distance from 50 indicative of the strength of the decline.

This contraction followed a solid improvement in February, indicating that fragile conditions persist in the construction sector, said Australian Industry Group chief economist, Julie Toth.

“After the strong improvement in February the survey results for March are clearly disappointing and a further indicator of the fragility of conditions across the construction industry.

“Driving the industry’s poorer performance was a return to contraction in house building and engineering construction, combined with sharper falls in commercial and apartment building activity.

“Of concern, the current stretch of decline in new orders for the industry has now extended to 34 months as businesses continue to be hampered by a shortage of new work, project delays and weak investor sentiment.

“The drop off in new orders was particularly sharp in the commercial construction sector reflecting a scaling back in public investment and on-going weakness in approvals," Toth says.  

Yesterday, the Master Builders national survey of home builders and contractors forecast the building industry to improve in the medium term, but are still struggling in the short term.

Despite the improvement in sentiment, the survey found that overall construction conditions remain weak.

Last month, the BCI Media Group forecast the construction industry to contract 4% over the three months to May 2013 and expects no major improvement in the construction sector over the next twelve months as the high Australian Dollar, tight company budgets, and tough bank lending criteria continue to squeeze the market.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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