AiG: Residential Construction Improving But Overall Construction Sector Weak

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The Australian Industry Group (AiG) and Housing Industry Association (HIA) have just released the latest reading of the Performance of Construction Index which showed another fall of 0.3 points to 45.9.

But it’s the commercial and engineering sectors which are the big drag on the index, falling 10.8 points and 6.3 points respectively. New orders also fell.

This weakness is overshadowing the recovery in residential, according to AiG director of public policy Peter Burn, but HIA economist Diwa Hopkins preferred to highlight the residential improvement.

Hopkins says that house building is the “success story” of the index and has been “expanding for eight consecutive months” while apartments are also now back in expansionary territory.

This index in many ways encapsulates what is happening in the broader economy but given that it also shows that monetary policy is clearly working where it should, there is much reason to hope that an eventual turnaround can’t be far away given, as Diwa Hopkins notes, “the residential construction sector has a large reach into the broader domestic economy.”

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