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Construction activity declined in December

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AAP

2013-01-08

Activity in Australia's construction industry has slowed for the 31st consecutive month, with the home and apartment sector remaining especially weak, a report says.

The joint Australian Industry Group (Ai Group) and Housing Industry Association's (HIA) performance of construction index (PCI) rose 1.8 index points to 38.8 points in December.

A reading below 50 indicates contraction and above 50 indicates expansion.

While the index has risen for the past three months, an indication the overall rate of contraction had slowed, the latest report shows housing and apartment building had declined further in December.

House building activity declined at its steepest rate in the three months, the report said.

"A number of reports from house builders indicated that the weakness in demand was marked by a reduction in home buyer enquiries and a lack of commitment from potential purchasers," Ai Group and HIA said.

Ai Group director of public policy Peter Burn said Australian construction activity was "deeply entrenched in negative territory", ending 2012 in a similar state as it began the year.

"Not surprisingly, given the toughness of business conditions, the industry is continuing to reduce employment," Mr Burn said in a statement.

HIA chief economist Harley Dale said the figures for the housing market mirrored other indicators that suggested already weak conditions in house building had deteriorated further.

"If policy makers were hoping the first housing update out in 2013 would deliver a signal of current policy settings boosting the chance of a new home building recovery, they're going to have to keep hoping," Mr Dale said.

On a more positive note, the report found commercial construction activity contracted at the slowest pace in a little over two years in December.

The rate of decline in engineering construction was also slower in December than in November.

"Businesses reporting declines in activity mainly attributed this to tight credit conditions, strong competition for existing work and uncertainty about the economic outlook," the report said.

The PCI was compiled with responses from about 150 companies.