Building slide quickens

Downward trend adds weight to call for help

APARTMENT building activity contracted for the 18th month in a row in September, falling more steeply than in the previous month, while a dip in engineering activity has added weight to the argument that government should boost infrastructure spending.

The Australian Industry Group/Housing Industry Association Performance of Construction Index (PCI) report released yesterday said activity fell 2.0 points from August to 42.6 – a dip that leaves the measure well below the 50-point mark separating expansion and contraction.

“The construction industry pulled back further in September with falls in activity across the residential, commercial and engineering construction sectors,” Ai Group policy head Peter Burn said.

Engineering activity reduced as “respondents reported slow progress on construction sites and a shortfall of new contracts to replace completed infrastructure work,” the Ai Group’s summary of the monthly report said. Engineering includes government-funded work on roads, bridges and utility supply systems.

“In view of these generally weak conditions, the case for an acceleration in infrastructure spending is clearly strengthening,” Dr Burn said.

The PCI also recorded a 14th consecutive month of shrinking house building activity but Dr Burn said it was positive that the sector’s trend reading for the month a gain of 2.3 points to 46.2 indicated that the pace of declines was easing.

“The signs are less encouraging in the rest of the industry with the overall activity and new orders indexes falling again in September and building and construction businesses are feeling the pinch between soft selling prices and continuing rises in input and wage costs,” he said.

The Reserve Bank of Australia on Friday acknowledged that home builders faced “challenging conditions”, saying in its Financial Stability Review that the “ongoing weakness in residential construction activity is likely to test the resilience of some firms”.