Construction still in the doldrums

09-08-2011

The national construction industry remained in the doldrums in July with further declines in activity, employment and new orders.

The latest Australian Industry Group Australian Performance of Construction Index (Australian PCI) in conjunction with the Housing Industry Association, rose just 0.3 points to 36.1. It was the 14th consecutive month of contraction for the sector (readings below 50 indicate a contraction in activity).

House building was the worst performing sub-sector in July, falling by 5.6 points to its lowest level in two and a half years (28.5).

All four major sub-sectors remained in the red in July largely due to weak levels of new work, delays in developments together with soft consumer confidence.

Australian Industry Group Director Public Policy, Peter Burn, said: "The Australian PCI shows a continuation of the very poor run for the construction sector and the house building sub-sector in particular.

“Consumer caution and the fear of further interest rate rises are dampening activity in residential construction. The commercial construction sub-sector is suffering as low levels of private sector activity are not making up for the withdrawal of government-backed projects. The decline in new orders gives little reason for the industry to think that a turnaround is in the wings," Dr Burn said.

Housing Industry Association Economist, Matthew King, said: "The July Australian PCI unequivocally spells out the presently bleak state of business and consumer confidence in this country. Before one even considers the strong prospect of a pre-Christmas interest rate hike, households and industry are facing destabilising factors in the form of economic and financial market uncertainty in the US and Europe, a brand new tax on carbon emissions and fictitious notions of an emerging house price bubble.

"As for house building, the ongoing acceleration of the decline has activity in this sector quickly headed for GFC lows. Slow progress in reducing structural supply side obstacles is quashing any chance of affordability moving to greener pastures. Meanwhile, as uncertainty continues to seep into the economic fabric of the US and Eurozone, apartment construction stands little chance of transitioning into expansive territory in the near term," Mr King said.

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