Construction downturn deepens in August


A sharp fall in new orders together with weak activity across all major sub-sectors saw the national construction industry fall to its lowest level in almost two and half years in August. 

The Australian Industry Group Australian Performance of Construction Index (Australian PCI) in conjunction with the Housing Industry Association, dropped 4.0 points to 32.1 to remain below the 50 point level for the 15th consecutive month (readings below 50 indicate a contraction in activity).

A lack of incoming work and new tender opportunities again plagued construction companies with all four major sub-sectors remaining in the red. 

The weakness was also reflected in the new orders sub-index which was at a new low in August (24.5).

Australian Industry Group Director Public Policy, Peter Burn, said: "The prolonged downturn in the construction sector is detracting from current levels of activity across the broader economy through its impacts on manufacturing and service industries linked to the sector. Construction employment has also been falling for some time and this too is being felt across the broader economy as households reliant on wages from this important sector cut back on their spending.

"Looking further ahead, the slump across the construction sector is leaving major gaps in the replenishment of the stock of houses and apartments and is a setback to the task of catching up on the long-standing infrastructure backlog," Dr Burn said.

Housing Industry Association Chief Economist, Harley Dale, said: "The significant deterioration in home building conditions is clearly continuing unabated in the second half of 2011. The fall in the new orders sub-index to a record low in August is just one example of the accelerated weakness that has hit the industry from the middle of this year.

"It is clear that stimulus measures are urgently required to prevent the prospect that new home building activity could again plumb depths experienced during the GFC. Structural reform is also vital and the upcoming Tax Forum next month provides an important opportunity to kick-start this process," Mr Dale said.

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