A sharp fall in new orders in August largely contributed to another month of contraction for the construction industry according to the latest industry data.

The Australian Industry Group Australian Performance of Construction Index (Australian PCI) in conjunction with the Housing Industry Association seasonally adjusted index was 32.2 in August – down slightly from 32.6 in July.

Readings below 50 indicate a contraction in the industry with the distance from 50 indicative of the strength of the decline.

Apartment building was the weakest performing sub-sector in the month – down 10.8 points to 22.1 – offsetting gains from the previous month. 

Engineering construction remained the strongest of the sub-sectors – although still in decline at 35.7 with respondents citing a slowing in resource sector demand and project delays as affecting activity.

"The continuing severe slump in residential and commercial construction is a drag on the overall economy, said AiGroup Director of Public Policy, Peter Burn.

“In August a weakening in the engineering construction sector contributed to a further worsening in the sector as a whole. Even though interest rates have fallen recently, the near-term outlook for the construction sector deteriorated with a further fall in new orders. The drop off in new orders was particularly sharp for engineering construction and the apartment sub-sector."