Housing surge buoys Oz industry

Australia's building industry contracted at a slower pace in August as demand for residential dwellings increased.

The index rose 2.9 points to 42.4 from July, according to a survey by the Australian Industry Group and Housing Industry Association released in Sydney yesterday.

July was the 18th consecutive monthly reading below 50, which shows the building industry is contracting.

Central bank Governor Glenn Stevens left the benchmark interest rate unchanged at a half-century low of 3 per cent last week for a fifth month, partly to spur the construction industry.

A report on September 9 may show home loans fell 1 per cent in July, the first decline in 10 months, according to a Bloomberg News survey of analysts.

"Industry activity is continuing to fall amid tight credit conditions and ongoing difficulties amongst firms in securing new project work," said Tony Pensabene, associate director at the Canberra-based association.

A gauge of engineering demand dropped 3.2 points to 31.8 in August, yesterday's report showed.

An index measuring apartment building leapt 15 points to 44.4 and commercial construction gained 1.3 to 39.6.

Demand for houses rose 0.6 points to 52.5.

- BLOOMBERG