Construction industry contracts for 24 months now

The national construction industry recorded its 24th consecutive month of contraction in May, according to the latest Australian Industry Group Australian Performance of Construction Index releases in conjunction with the Housing Industry Association.

The index remained in the red in May, down 0.2 points to 34.7, with readings below 50 indicating a contraction in activity and the distance from 50 indicative of the strength of the decrease.

By sector, commercial construction registered the sharpest fall in more than three years coinciding with a further weakening in new orders.

House and apartment building activity continued to contract substantially.

Julie Toth, Australian Industry Group chief economist, says the index continues to reflect the cyclical downturn in residential housing activity as well as the downturn in non-residential building and construction, outside the mining sector.

“While the two consecutive cash rate cuts from the RBA in May and June are very welcome and will help to improve sentiment among home builders and investors, it will take some time for this benefit to flow through to actual construction activity levels.

“In the meantime, the forward indicators such as building and credit application approvals all point to a further period of extended weakness in construction activity levels from here,” Toth said.

This article first appeared on SmartCompany0.