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Construction industry performance continues to wane in October

Ai Group associate director of economics and research Tony Pensabene said the latest index reflected the impact of tight credit conditions, weak demand and deteriorating economic sentiment.“Although the latest data suggests that the rate of industry contraction eased slightly in October, conditions overall remain particularly subdued,” Pensabene said.“This weakness was most noticeable in the house building sector where activity contracted significantly.“On the positive side, commercial construction posted marginal growth in October following a severe drop in activity during the previous month.” According to Housing Industry Association chief economist Harley Dale, the housing industry has been weakening for 12 months, but the wane has intensified over the last few months.“Lower interest rates and federal fiscal stimulus will put a floor under sentiment and under a clear down cycle evident for all leading housing indicators,” Dale said.“The onus is firmly on state and local governments to get their act together on appropriate release of affordable land and reduction in planning delays to ensure the opportunity for a recovery in new home building in 2009 is not constrained by unnecessary supply side obstacles.“Such constraint would be at a cost to the Australian economy as a whole.” The HIA Performance of Construction Index key October findings were:The Australian PCI recorded 36.4 in October, a rise of 4.6 on September’s recorded PCI;The PCI remaining under the key 50-point level reflected the impact of weaker house building activity, and a waning in engineering and apartment building project work;Construction companies have attributed the continuing slump to the ongoing credit crisis and deteriorating economic sentiment, which has led to the scaling down of new projects, fewer tender opportunities and ongoing delays in development activity;The construction industry registered continued reduction in activity and new orders, although at a slower rate than September. The decline led to further cutbacks in employment and supplier deliveries; andConstruction material (input) costs rose in October, and growth moderated in response to lower commodity prices, and a more competitive market caused by reduced demand.