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CANBERRA - Australian construction activity contracted for the second month in a row in November as rising interest rates continued to bite into the housing sector, a survey said today.
The Australian Industry Group/Housing Industry Association Performance of Construction Index (PCI) fell by 1.6 points in November to 47.6, below the 50.0 level separating expansion from contraction.
"Three rate rises this year have combined to dent activity in the housing and apartment sectors, particularly in the mortgage heartland of the largest capital cities," said AIG Associate Director, Economics and Research, Tony Pensabene.
"Strengthening activity in commercial and engineering construction is providing a floor under what could have been deeper consequences for the construction sector from the recent interest rate increases."
Australia's central bank left interest rates unchanged on Wednesday at 6.25 per cent after three rises since May aimed at restraining inflation.
The AIG said house building activity in seasonally adjusted terms continued to contract in November, although the rate of decline slowed and the index rose 5.6 points to 40.2 points, off the October trough, which was the lowest since the series began in September 2005.
Commercial construction recorded the strongest growth, rising 9.5 points to 61.9, with firms attributing the rise to new contracts.
Engineering, including mining, rose by 4.4 points to 58.0 as Australia's mining boom rolled on.
New orders contracted for the second month running and the survey found a large number of house building firms were reporting weaker order books due to a decline in customer enquiries and reduced buyer confidence.
The employment index fell for the first time in two months, dropping 8.6 points to 46.4, its lowest level for seven months, with the biggest declines coming in the housing and apartment building sectors.
- REUTERS
