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Construction sector weak but pace of decline eases

Thursday, 10 Nov 2011 ( #539 ) - Canberra, ACT, Australia
Local News Story
Ai Group director - public policy, Peter Burn.
The construction industry declined at a slower rate in October, according to the latest Australian Industry Group Performance of Construction Index (Australian PCI).

Though still in the red, there were signs of improvement, with rates of decline in activity easing across sub-sectors.

Ai Group director - public policy Peter Burn says the ongoing weakness in the construction sector, most notably in the housing, apartment and commercial construction sub-sectors, continues to hold back overall economic activity and, in particular, activity in those industries, such as manufacturing, with close links to construction.

"The easing of the pace of decline in overall construction activity and the turnaround in the Australian PCI new orders sub-index after a steepening pace of decline over the year to date is somewhat encouraging. While global economic uncertainties persist and domestic confidence is yet to bounce back, the Reserve Bank's decision last week to reduce interest rates could help build the momentum towards recovery in the sector over coming months," says Burn.

Housing Industry Association acting chief economist Andrew Harvey says while it's disappointing that the level of house building activity continues to contract, it is good news that the speed of decline in that contraction looks to be moderating.

"This trend combined with the eventual impact of (last) Tuesday's interest rate cut will hopefully see a return to expansion in activity in the longer term. A moderation in the rate of decline in new orders for houses and apartments also gives some hope of an eventual return to growth in residential building activity levels."
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