Construction downturn moderates

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The downturn in Australia's construction sector moderated in October, thanks to the improvement in the detached housing segment, according to the latest report by the Australian Industry Group (Ai Group) and the Housing Industry Association (HIA).

The Australian Performance of Construction Index (PCI) reflected a score of 43.9 points, up by 1.3 points from September. PCI has been contracting for 14 consecutive months, but the recent reading showed the slowest rate of decline in 15 months.

"The improvement in housing markets since mid-year, particularly in Sydney and Melbourne, is beginning to restore confidence. The improvement is clearly evident in the sub-indexes tracking construction activity and new orders for detached houses," HIA senior economist Geordan Murray said.

Also read: Housing construction clocks surprise gain

While the detached housing segment showed improvement, the apartment market remained the weakest-performing area of activity, reporting its 19th consecutive month of decline.

The residential sector will likely take some time before expanding again, but the low interest-rate environment will continue to provide support, said Ai Group head of policy Peter Burn.

"In what might be an early sign of the impact of recent interest rate reductions, there was an easing in the pace of decline in activity and new orders in the housing sector," he said.

Commercial building work remained subdued in the month, but the rate of decline showed no acceleration.

"While conditions vary significantly across the sector, developments in major commercial and social building categories, including hotels and tourist-related projects, industrial premises, education and health buildings, are providing support to the sector's overall performance," the report said.

Engineering construction activity also contracted, as conditions remain soft due to a shortfall of new contracts to replace completed infrastructure projects.

"This appears to be related to slow progress on planned projects and lags between the design and development of projects and their transition through to construction," the study said.

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