Construction industry decline rate easing, says Australian PCI

The Ai Group said this week that while the rate of decline had slowed, the decline was nonetheless continuing, which was a reflection of weak market demand and a lack of new project work.The Australian PCI index stood at 30.4 in March, up by 0.9 points but remaining below the key 50 points level that separates expansion from contraction.“The March Australian PCI results show more evidence of a struggling construction industry as low market demand and tight credit conditions lead to ongoing falls in activity,” Ai Group associate director, economics and research Tony Pensabene said.“However, there is an easing in the pace of the industry’s contraction, reflecting slower rates of decline in the house building, apartments and commercial construction sectors.”Pensabene noted that, while well away from a meaningful recovery, there had been a considerable easing in the rate of contraction in house building activity since late 2008 on the back of lower interest rates and the increase to the first home owners’ grant.“In addition, the sizeable moderation in the level of contraction in apartment building activity in March follows the recent upturn in approvals for the sector, and may provide an early sign of firmer investor demand, although it is a volatile segment of the building market,” Pensabene said.Housing Industry Association chief economist Harley Dale said an easing in the rate of contraction in construction activity was encouraging, particularly given that the industry had endured 14 consecutive months of weakness.“With current initiatives clearly having a positive impact on parts of the market, there is a requirement to provide further stimulus to new residential construction to support activity, employment and the demand for manufactured products,” Dale said.

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