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ConstructionCONSTRUCTION remained soft, contracting in October due to weakness in existing activity and new orders, a survey shows.

The Australian Industry Group Housing Industry Association Performance of Construction Index (PCI) increased 3.2 points to 44.0 in October.

Readings below 50 indicate contraction in activity.

The PCI survey found that while the four major sectors spent the month in negative territory, there was a distinct slowing in the pace of decline in the house building and commercial construction sectors.

House building lifted 15.5 points to 47.9, the sector’s highest reading in five months.

But project delays and intense competition to secure existing contracts continued to have an adverse impact on activity, especially in the engineering construction and apartment building sectors.

Australian Industry Group Director of Public Policy, Peter Burn, said while the easing in the pace of decline of the construction sector during October was “somewhat encouraging,” the ongoing weakness in the sector made it “highly vulnerable” to increases in interest rates.

“The clear risk is that the trend back towards growth in the house building, commercial construction and apartment sub-sectors will be halted by higher borrowing costs and lower demand,” Dr Burn said.

The PCI survey showed the activity sub-index improved to 42.2 and delivery of inputs from suppliers continued to decline.

It said project delays and intense competition to secure existing contracts continued to be a “major hurdle” for construction companies.

Housing Industry Association (HIA) chief economist Harley Dale said while the slowing in the rate of contraction in the Australian PCI in October provided better news, he questioned whether the turnaround would become a trend.

“The interest rate environment, in terms of both action and speculation, is proving highly damaging to home building confidence and activity at a time when there is already compelling evidence that 2011 will be a weaker year for residential construction.”

Story source: www.goldcoastmail.com.au

Tags: building, economy, employment, news, real estate, research

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