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AAP

2012-11-07

Australian construction activity is weakening at a slower rate than before, but has now been in contraction for 29 months, an industry study shows.

The Australian Industry Group (Ai Group)/Australian Housing Association (HIA) performance of construction index (PCI) showed activity rising to an index of 35.8 in October, up from 30.9 the previous month.

The rise shows contraction happening at its slowest pace in seven months, and provides some relief to a sector which has been in the red since mid-2010.

The survey noted a rise in new orders - at 36.8 points, from 29.1 in September - while the usually-weak house building sector jumped 12.5 points to 41.1 points.

HIA chief economist Harley Dale said the data provided good early signs that the sector could be turning around, although it was still weak.

"A protracted period of contraction in the Australian PCI, which in October extended to 29 consecutive months, represents a blight on Australia's economic performance and has made it difficult to find any glimmer of hope for the construction industry," he said.

"An October reading of 35.8 remains very weak. But at least the pace of contraction has eased.

"Signs of a recovery in residential construction are tentative to date and have generally been over-played. But, if we were to see a sustained improvement in key sub-indices of the Australian PCI, new orders, for example, over coming months, then that would be a key signal of a turnaround."

He noted that weakness continued in the employment subsector, with wages falling by 3.3 points to 54.7 in October.