Having briefly pushed into expansionary territory in March, activity across Australia’s construction is once again contracting.
The AI Group-HIA Performance of Construction Index slipped 3.1 points to 47.0 in April, below the 50 level that separates industry expansion from contraction.
All index components, aside from selling prices, deteriorated in April with new orders down 6.2 points to 44.6, along with employment and wages off 3.4 points and 4.3 points respectively. These were the chief catalysts behind the slump in the headline reading.
House construction was the only sector to expand during the month, although at a slower pace than was seen in March, while apartments slipped 5.2 points to 49.7, somewhat surprising given booming building approvals for these types of developments. Although still contracting, commercial and engineering construction posted modest improvements.
AI Group head of policy Peter Burn commented on the monthly developments:
“House building was the major positive and engineering construction remained the biggest drag on the Australian construction sector in April. With the volatile apartment sub-sector slipping into negative territory and commercial building still contracting, the overall construction sector went backwards. The distinct fall in sector-wide new orders is a clear warning that activity is unlikely to rebound anytime soon with only the house building sub-sector avoiding contraction. The Reserve Bank’s further trimming of interest rates this week may stimulate activity somewhat but it is difficult to see why this additional reduction will be effective in lifting overall activity unless supported by a degree of budget stimulus next week”.