December heralded the 16th consecutive month of contraction for the Australian Industry Group and Housing Industry Association Performance of Construction Index, which dropped 1.1 per cent to 38.9 – well below the 50 point mark that separates growth and decline.
Wednesday’s data comes ahead of the Australian Bureau of Statistics’ November building approvals figures, which most economists predict will have bounced back somewhat from a dismal October showing.
NAB, however, says a further decline in unit approvals will likely outstrip a slight increase in house approvals for the month.
Of the four construction sectors in the December PCI release, house building was again the best performing sector with activity showing stability for a second month, up 0.8 points to 50.8.
In contrast, apartment building remained firmly in negative territory, though it rose 0.9 points to 37.4.
Ai Group head of policy Dr Peter Burn said the decline in the engineering construction sector was particularly severe in December, falling at its most precipitous rate in more than a decade
“Commercial construction and apartment building activity also ended the year heading lower,” Burn said.
“In contrast, house building activity lifted marginally.”
Burn said while the number of infrastructure projects in the pipeline was cause for optimism – as was the recent federal announcement of an acceleration of some projects – the broader construction industry was undergoing a difficult period of adjustment.
“This is flowing through to other sectors – particularly to industries supplying machinery and equipment and building and construction material,” he said.
“There is now a clear danger of a self-reinforcing downturn across significant parts of the domestic economy.”
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