This article is from the Australian Property Journal archive
THE construction industry index has fallen by a further 3.1 points to 43.3 in July, led by large decreases in engineering and commercial work.
The Ai Group/HIA Construction Index shows weakness was evident across all major building sectors as they continue to be affected by difficult market conditions, subdued client demand and intense competition to secure new work.
Ai Group director of public policy Dr Peter Burn said coupled with the dampening impacts on the construction industry of the continued unwinding of public sector spending and higher interest rates, is slowing the momentum of recovery in the broader economy.
“Businesses in the construction industry are competing vigorously for new work with a nervous eye both on their order books and emerging wage pressures,” he added.
The worst affected were engineering and commercial construction were activity fell to 36.2 and 35.3 respectively. Commercial construction has recorded its lowest reading in the past 17 months.
Residential builders cited tight finance restrictions on new house building and weak demand from first home buyers as affecting activity, whilst activity in the apartment building sector fell for a third straight month.
HIA economist Harley Dale said contraction in both the detached and non-detached housing sectors adds to the overwhelming evidence that, post a highly stimulatory monetary and fiscal policy environment, new home building activity will run out of puff.
“This further highlights the need for stable interest rates and the urgent need for further policy reform to reduce the obstacles to boosting Australia’s new housing supply,” Dale said.
And the outlook is also weak, the index also shows new work orders declined in July, down 2.7 points to 43 points, for a second consecutive month.
New orders in house building declined for a second consecutive month, falling 1.6 points to 44.6, whilst the apartment sector continued to decline, although at a slower rate, with the index registering 46.5, an increase of 0.6 points on the previous month.
Engineering new orders also fell for a second straight month, with the sub-index falling by 0.6 points to 42.2.
For the commercial construction sector, new orders declined following growth during the previous four months, with the sub-index falling by 10.8 points to 40.9. This was the lowest reading in the past 10 months and appears to be linked to a moderation in public building approvals following a strong lift in school buildings approved in the second half of 2009.
Australian Property Journal
