Construction downturn eases in February

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The current downturn facing the Australian construction industry has eased slightly, according to the latest Australian Performance of Construction Index figures.

A fall in house prices has slowed new residential construction

The index – compiled monthly by the Ai Group and Housing Industry Association – gave an overall reading for the sector of 43.8 points for the month of February (results above 50 indicate growth). Although still contracting, the new reading is an improvement of 0.7 points on January’s result, indicating the contraction is slowing.

All four sectors (house, apartment, engineering and commercial construction) of the Australian PCIcontracted in February.

Weighing heavily on industry conditions was continued weakness in the house and apartment building sectors where rates of decline in new orders were the most marked since mid-2013.

Commercial construction fell further into negative territory while engineering construction declined for a third month due to a shallower pool of new work to replace completed and more advanced projects.

"Australia’s construction downturn continued in February with activity falling in all four sub-sectors and employment levels contracting," Ai Group head of policy Peter Burn says.

"The downturn is most acute in the residential sub-sectors while both engineering and commercial construction also contracted again in February. In large part, the drop in residential activity is a further and to-date orderly wind-back from the historically high levels of activity.

"On the positive side, there is clearly capacity to lift construction activity if policy makers are looking to stimulate the slowing economy," Burn adds.

HIA economist Tom Devitt warned that the downturn in construction could have knock-on effects for the wider Australian economy.

"The Australian PCI shows the housing market downturn accelerated in the second half of 2018, " Devitt says.

"Across detached houses and apartments, activity is contracting and so too are new orders. The pipeline of building work looks to be shrinking at a concerning rate. Residential building has been pivotal in driving activity in the rest of the economy for the past five years."


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