Decline in construction activity does not bode well for the economy

by Julia Corderoy08 Dec 2014
Construction activity moved back into negative territory in November, sparking more concern about the health of the economy. It is the industry’s first decline since May this year. 

Residential home building activity remained in expansion territory; however it declined by 5.5 points in November, signalling the slowest rate of growth in eight months. According to the report by the Australian Industry Group and the Housing Industry Association, this is consistent with a weakening in new order intakes over the past two months and the dip in building approvals in September.

Apartment building activity remained solid, although growth was also slower with the sector’s sub-index declining 2.4 points on October’s reading. It nevertheless marked the fifth consecutive month of expansion in apartment building activity.

Housing Industry Association chief economist Harley Dale said this downturn does not bode well for the already sluggish economy.

“Perceptions regarding Australia’s short-term economic outlook have dampened recently and today’s result will hardly buoy the prevailing mood. The rate of expansion in detached house and apartment building activity slowed in November, but at least both these sub-indices remained in the black. It will be disappointing if the rate of expansion in these Australian PCI® components fails to re-accelerate in coming months given new home construction is currently the key domestic sector with promise of healthy activity in 2015.”