Construction Industry Posts Losses

Construction 'in negative territory'

"The Australian construction industry has posted its first contraction in seven months in the wake of back-to-back interest rate rises, a survey has found.

The Australian Industry Group-Housing Industry Association performance of construction index (Australian PCI) fell 5.5 points in March to 48.4, to be 2.7 points lower than its level in the corresponding month of 2007.

The number is under the 50 level which separates expansion from contraction, for the first time since August 2007.

The house building measure slipped 7.7 points to 41.1 while the volatile apartment building sector was down 3.4 points to 40.

Commercial construction suffered a 14 point fall to 48.2 but engineering construction rose 2.8 points to a three-month high of 58.3.

Australian Industry Group associate director of economics and research Tony Pensabene said higher interest rates and falling consumer sentiment had hurt the construction industry.

"Interest rate hikes, the rise in the cost of funds and falling consumer sentiment are clearly taking their toll on the industry, and with new orders now at their lowest level in ten months, we are likely to see further weakness ahead," he said.

"While engineering construction is benefiting from an expanding investment pipeline, particularly in infrastructure projects, house building, apartments and commercial construction all fell in March, dragging overall construction activity into negative territory for the first time in six months."

New orders were down 7.9 points to 44.4.

Housing Industry Association chief economist Harley Dale said the gap between housing supply and demand was likely to widen.

"The decline in the Australian PCI is consistent with other indicators of new home building which have all deteriorated in recent months," he said."

http://news.theage.com.au/construction-in-negative-territory/20080407-247b.html