Back to back interest rate rises have affected yet another industry – construction.
The Australian construction industry has deteriorated in March 2008, posting its first decline in seven months, due to weaker commercial construction activity, and a further fall in house and apartment building.
The Australian Industry Group/Housing Industry Association performance of construction index (Australian PCI) fell 5.5 points in March to 48.4, to be 2.7 points lower than its level in the corresponding month of 2007.
An Australian PCI reading above 50 points indicates construction activity is generally expanding: below 50 that it is declining.
Australian Industry Group associate director, Economics and Research, Tony Pensabene, said:
”While engineering construction is benefiting from an expanding investment pipeline, particularly in infrastructure projects, house building, apartments and commercial construction all fell in March, dragging overall construction activity into negative territory for the first time in six months.
“Interest rate hikes, the rise in the cost of funds and falling consumer sentiment are clearly taking their toll on the industry, and with new orders now at their lowest level in 10 months, we are likely to see further weakness ahead,” Mr Pensabene said.
The findings, which are based on a sample of 120 companies, reveal the industry as whole has seen declines in March following interest rate rises in the previous six months.
New orders were down 7.9 points to 44.4.
“Moreover, it was the most subdued level of incoming construction business in the past ten months.”
Australian PCI said that despite the overall fall in activity, growth in engineering construction was maintained at the highest rate in the past three months.
