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Construction industry continues contraction

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Construction continued to contract in March, according to an index measuring activity in the sector.

The Australian Industry Group (Ai Group) Australian Performance of Construction Index in conjunction with the Housing Industry Association (HIA) rose 0.6 points to 36.2 in March. A reading below 50 indicates contraction.

House building activity fell further with the sub-index down 7.6 points to 30.3. The sub-index for apartment building fell 3.9 points to 30.5. And the engineering construction sub-index fell by 0.5 points to 41.2.

The commercial construction sub-index rose 9.2 points to 35.5, which, according to the survey, is an early indicator more projects “are starting to receive the go ahead”.

The new orders sub-index fell one point to 33.2. Australian Industry Group director public policy Peter Burn says the fall in new orders “points to a continuation of flat conditions over the coming months”.

HIA chief economist Harley Dale says there’s an “unequivocal deterioration underway in the non-resource domestic economy in 2012”.

“As a bell-weather industry, residential construction is clearly highlighting this fact with the rate of decline in the detached house and apartment sub-indices of the Australian PCI accelerating in March,” he says. “Furthermore, new orders for house building fell in March to their lowest level in six months. It was time to act some time ago, but nothing has happened. A 50 basis point cut in interest rates is required in May, while Federal and State Governments need to get on with the job of boosting new housing supply.”

Published on: Tuesday, April 10, 2012