Construction industry deeper in the red


The national construction industry contracted for the fourth consecutive month in September with activity continuing to fall across all major sectors.

The seasonally adjusted index fell 2.4 points to 40.8 in September, according to the latest Australian Industry Group Australian Performance of Construction Index (Australian PCI) in conjunction with the Housing Industry Association.

This is well below the critical 50-point level separating expansion from contraction.

The construction activity sub-index was down to 36.9 in the month reflecting the reductions in activity across construction. 

The weakest conditions were evident in the house building sector where activity fell by 6.0 points to its lowest level since March 2009. 

A drop in new orders across the whole construction industry also contributed to the weaker results.  

Australian Industry Group Director Public Policy, Dr Peter Burn, said:  "As September's Australian PCI demonstrates, construction companies continue to be plagued by weak market demand and on-going delays in project starts as private demand struggles to fill the gap left by the drying up of projects funded by fiscal stimulus measures.

"The weakness across the construction industry in September and the discouraging near-term outlook reflected in low levels of new orders provides further evidence that the decision of the Reserve Bank not to raise interest rates was appropriate. Higher interest rates would be a further set back for the industry which is already suffering from a lack of demand and is trimming its labour force accordingly," Dr Burn said.

Housing Industry Association Senior Economist, Andrew Harvey, said: "The fourth consecutive monthly fall in the house building sub-index of the Australian PCI is further evidence that the outlook for the Australian housing industry is not a positive one. The housing sub-index is now at its lowest point in more than a year and a half, and if we add to this the increasing speed of decline in the new orders for house building, then it is increasingly clear that we are in for a marked downturn in residential building.”

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