Industry News

Construction sector regaining momentum

The latest Australian Industry Group/Housing Industry
Association Performance of Construction Index rose 3.9 points to 47.6 in
September, following a return to growth in the house building and apartment
building sub-sectors.

Although this number is still below the 50-point level separating
expansion from contraction, it is the highest reading since May 2010. It was
bolstered by the apartment building index which increased 20 points to 57.7
after 40 consecutive months of decline.

The Australian Industry Group said businesses are now beginning
to see more work and inquiries are on the rise as well. 

?This is a result for September. In that month we saw the
NAB business confidence index rise, we saw a sharp lift in the
Westpac-based survey of construction. It would appear there?s a bit more
confidence in the air,? HIA chief economist Harley Dale said.

Expanded activity, ongoing caution
In September, growth in new orders drove an expansion in
activity for the first time since April 2010. The activity sub-index was eight
points higher than the previous month and at 51.9 ends 40 consecutive months of
Despite the signs of improving demand, employment levels
continued to decline in September, suggesting ongoing caution in the hiring
intentions of construction businesses.

?The construction sector is closer to stabilisation than at
any time since mid-2010,? Australian Industry Group chief economist Julie Toth said.

She said the housing and apartment sectors were performing
better on the back of lower interest rates and a lift in buyer sentiment and
declines in commercial and engineering construction moderated during the month.

?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.

Sources: Australian Industry Group, Housing Industry
Australia, Smart Company

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