Construction downturn eases in January

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The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index increased by 2.4 points, indicating that the construction downturn eased somewhat in January.


Construction activity (up 5.8 points) and new orders (up 4.0 points) continued to contract in January, if at slower rates relative to the previous month. 

Of the four construction sectors; house building was again the best performing sector with activity indicating mild expansion (up 1.0 point). In contrast, apartment building remained firmly in negative territory (up 0.1 point).

Across the major project sectors; engineering construction fell for an eighth month (up 0.5 points) while commercial construction recorded a 18th month of contraction amid continued weakness in demand (down 1.1 points).

"While continuing to perform weakly, the Australian construction sector declined at a slower pace in January," Australian Industry Group Head of Policy Peter Burn says.

"The house building sector expanded for the first time since mid-2018 after stabilising in the closing months of last year.

"Other sectors continued to disappoint with apartment building down for the 22nd straight month; engineering construction continuing the weak patch that began in the middle of 2019; and commercial construction capping a year and a half of monthly declines.

"Building and constructing businesses are finding themselves squeezed between lower selling prices, growing wages and material input costs rising sharply over January.

"Not surprisingly, employment across the sector fell and there is little prospect of a quick turnaround with new orders also lower in the opening month of 2020."

Housing Industry Association Economist Angela Lillicrap says house building expanded slightly in January to be the strongest performing of the four construction sectors.

"This is consistent with other leading indicators including new home sales and housing finance that suggest the market reached a gentle turning point in the middle of the year.

"The return to house price growth is also boosting confidence in the housing market which is supportive of increased demand for housing in 2020."


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