Australia's Construction Sector Is Still Contracting

Getty/Bill Pugliano

The AiG/HIA Performance of Construction Index showed the Australian construction industry is still contracting, even though things improved a little in March.

The rise of 2 points is positive but the index still sits well below the expansion-contraction point of 50, registering 46.2 in March.

Disappointingly after a move back into positive territory in late 2013, this is now the third month of contraction. But the positive, according to the AiG, is “the easing in the sector’s contraction was due to slower declines in both new orders and activity.”

Housing Industry Association chief economist Harley Dale, said: “The detached house activity component remains expansionary, if only just, and 2014 should be a healthy year for new home building activity. What the sector and broader economy needs, however, is a sustained recovery in new home building commensurate with average construction levels being considerably higher over coming decades than those achieved over the past 20 years.”

The RBA would certainly approve of Dale’s thoughts as it would aid the transition to broader growth it is looking for and most likely constrain property price rises across the nation.

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