Australian construction activity contracted in January for the 20th consecutive month, however the rate of decline is slowing according to the latest Australian Industry Group Australian Performance of Construction Index (Australian PCI).
Put together in conjunction with the Housing Industry Association, the seasonally adjusted index fell by 1.2 points to 39.8 in January - readings below 50 indicate a contraction in activity.
Activity was particularly subdued in the commercial (30.4) and apartment building (34.6) sectors. However, the pace of decline eased in the house building sector (41.1) with businesses citing the interest rate cuts in November and December of last year as helping to support an improvement in customer enquiries and activity.
Despite a negative activity reading in the month, engineering construction (47.8) remained the best performing sector.
Businesses mainly attributed the on-going weakness in the industry to tight credit conditions, a lack of new tender opportunities and strong competition for existing work.
Australian Industry Group director public policy, Peter Burn, said: "Commercial and residential construction continued to drag on the overall construction sector in January. Engineering construction remains distinctly stronger than the rest of the sector due in large part to resource-related projects.
"While the rest of the industry remains well and truly in negative territory, the interest rate reductions towards the end of last year appear to have helped reverse the accelerating falls in new orders for residential construction with the new orders sub-index for house building rising again in January following solid improvements since last September," Dr Burn said.
Housing Industry Association Chief Economist, Harley Dale, said: "It is encouraging to see an easing in the pace of decline for house building, vindicating the two interest rate cuts at the end of last year, but also justifying the case for further reductions given that the house building sub-index has still been contracting for over eighteen months.
"Tight credit conditions being cited yet again as a primary driver of what is an entrenched contraction in the Australian PCI represents just one reality bite as to why it will take more than just monetary policy easing to set the residential and commercial construction sectors back on a sustainable recovery path," Dr Dale said.
