Australian construction drop stabilises

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Australian construction fell overall again in November, despite stabilisation in the house building sector according to the latest Australian Performance of Construction Index (Australian PCI).

The drop in house building activity slowed in November

The index, compiled monthly by the Australian Industry Group and Housing Industry Association, dropped 3.9 points to 40.0 (readings above 50 indicate growth) despite recent interest rate cuts and an easing of bank lending restrictions.

"Australia's construction sector deteriorated further in November with activity lower and employment and new orders falling steeply," Ai Group Head of Policy Peter Burn says.

"Activity declined most steeply in engineering construction with apartment building not far behind. Commercial construction activity also fell leaving the stable level of activity in house building as the relative bright spot in the month. Pressures on selling prices were maintained and with wages and input costs continuing to rise, the squeeze on margins intensified," Burn says.

HIA representatives were positive in their outlook, but warned the return to previous levels of activity has not yet happened.

"House building activity defied the declines of the broader Australian PCI this month," HIA economist Thomas Devitt says.

"While this is not an indication that home building is returning to the strong conditions of recent years, it is not declining as fast as was apparent over the past year.

"This is consistent with the stabilisation we have seen in a number of other indicators including housing finance and new home sales. It is also good to see the effect that record low interest rates and looser lending conditions are having on the established housing market."

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