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House construction underpins national growth

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Residential housing construction continued its national recovery in December, keeping the Australian Performance of Construction Index in positive territory.

The Index (PCI) measures activity in the construction sector with readings above 50 indicating an expansion in activity.

The December PCI, released today, remained in growth territory by a nose at 50.8.

After two months of strong growth, December signalled a slower pace of expansion but was well ahead of the average for the year (43.9).

House building recorded the second highest rate of expansion since the survey’s inception in September 2005 rising 1.5 points to 63.5.

Commercial construction (50.8) and apartments (56.0) also remained in the black while engineering (46.1) slipped back into negative territory.

Australian Industry Group Director, Public Policy, Peter Burn, said “the recent spurt of growth in residential construction continued in December with ongoing strength in both apartment and house building activity”.

“In line with the easing of the mining investment boom, engineering construction was weaker in December and with further falls in store; the time is ripe for a much more decisive focus on building new and upgrading existing transport infrastructure.

“Commercial construction, while only just in positive territory in December, is showing signs that the extended recession in this sector may be drawing to a close.

“Low interest rates are clearly having their long-awaited impact and the continued growth of new orders means that builders – and the manufacturing and service industries that are linked to the commercial and residential construction sectors – can look forward to 2014 with a greater degree of confidence than prevailed only a few months ago.”

Housing Industry Association Chief Economist, Harley Dale, said the December result was good news for the economy on a broader scale.

“Four months of such expansion, following as it does years of contraction, is an important tick in the box for Australia’s growth prospects in 2014 given the position of the Australian PCI as a key leading indicator of Australia’s construction activity.

“The on-going strength in apartment and house building sub-indices is pleasing to observe.

“Detached housing, for example, still accounts for over 60 per cent of new home building and has a substantial ‘reach’ into Australia’s manufacturing sector.”

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