Decline easing in Australian construction industry

Australia's construction industry declined at a slower rate in August compared to the previous month according to The Australian Industry Group/Housing Industry Association Performance of Construction Index (Australian PCI).

The Australian PCI index rose by 2.9 points last month from 39.5 to 42.4, however, the reading remains below the critical 50 points no change level which signals an on-going weakness in overall industry conditions.

In a statement the Australian PCI said reductions in engineering and commercial construction were the main negative influences on activity in August. However, it added house building projects exhibited further resilience and increased for a second consecutive month, while the pace of decline eased considerably in the apartment sector.

The Australian Industry Group (Ai Group) associate director, economics and research, Tony Pensabene, said, "The latest results show that total industry activity is continuing to fall amid tight credit conditions and ongoing difficulties amongst firms in securing new project work, particularly within the engineering construction sector. Consequently, the industry experienced its seventeenth consecutive month of declining employment.

"However, more positive developments were the moderation in the pace of the industry's contraction, and the continued growth in house-building activity, resulting in an easing in the pace of decline from the extreme lows of the start of the year," he added.

Chief economist for the Housing Industry Association (HIA), Harley Dale, said, "The underlying house building index of the Australian PCI is a shining light for the construction industry. It is back in positive territory and along with a range of leading indicators is signalling a recovery in new house construction in 2009/10.

"The early stages of the recovery through the second half of 2009 will be slow, but at least we're moving in the right direction."

He added the apartment sector is still very weak and despite the rate of decline easing in the July and August component of the Australian PCI, credit constraints and a lack of investor interest are still weighing heavily on this sector of the industry.