Constructive Month for Construction Sector

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Constructive Month for Construction Sector

Australian Industry Group chief economist Julie Toth has said that, “The construction sector is closer to stabilisation than at any time since mid-2010”. She has noted the housing and apartment sectors are performing better due to lower interest rates and higher buyer sentiment. She also said declines in commercial and engineering construction moderated during September.

This positive outlook came off the back of some positive news for the battling national Australian Construction Sector. Over the month of September the Australian Industry Group/Housing Industry Association Performance of Construction Index rose 3.9 points to 47.6. This followed a return to growth in the house building and apartment building sub-sectors.

The result still pegs the sector below the 50-point level separating expansion from contraction, but is the highest peak since May 2010. The main contributor to the index growth was the apartment building index, which turned around 40 months of consecutive decline into a 20 point increase.

September also saw the NAB Business Confidence index rise, and a distinct uptick in the Westpac Survey of Construction.

“Despite these encouraging trends, it is clear that the industry continues to face a tough operating environment with impediments such as tight credit conditions and a lack of public sector building activity continuing to weigh on overall activity,” Toth said.

“Nevertheless, with new orders increasing for the first time since May 2010, there are grounds for cautious optimism about the current improving trend.”

Across the sub-sectors, house building recorded its strongest reading since May 2010 (61.5) while apartment construction (57.7) ended 40 months of declining activity. The rate of decline in commercial construction (43.7) moderated while engineering construction (49.0) was close to stabilising in the month.