Skyeast Investment Corporation

Tough conditions in the Australian construction industry kept the sector in negative territory in August, survey data from the Australian Industry Group and Housing Industry Association showed Tuesday.

The seasonally adjusted performance of construction index dropped slightly by 0.1 point to 43.2 in August. A reading below 50 suggests a contraction in activity.

All major sectors remained in the red, with house building easing to 38.4, the lowest reading in 16 months. Poor market demand and severe competition to secure existing contracts adversely affected construction, resulting in a drop in new orders, deliveries and selling prices.

The new orders sub-index came in at 43.5 and deliveries from suppliers dropped 4.7 points. At the same time, the employment sub-index declined at a slower rate in August.

"The disappointing results for the Australian PCI in August suggest that the construction sector is yet to bounce back from a distinct decline in performance since May," Australian Industry Group Director Public Policy, Peter Burn said.

Rising interest rates earlier in the year played a role in dampening demand, while the on-going lack of available finance for development is showing no material sign of improvement and is a major obstacle to a sustained recovery, according to HIA chief economist, Harley Dale.

"If you add within this restricting environment the perennial supply side issues related to, for example, lack of affordable land and high taxation and regulation on new housing, it is difficult to envisage a short term turnaround," Dale added. (Provided by RTTNews)