Concern grows as construction tumbles

Construction activity took a tumble in November, adding to concerns about the health of the economy.

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The construction industry contracted for the first time since May, according to figures from the Australian Industry Group and Housing Industry Association.

The Performance of Construction Index dropped eight points to 45.4 in November – below the 50 level that separates expansion from contraction.

A slowdown in public building activity and demand for housing were weighing on the industry, with the reduced workload forcing job losses, the report said.

The disappointing report comes after official figure showed a shock slowdown in the Australian economy in the September quarter, sparking debate about whether the cash rate should be slashed to a new record low.

Growth in house and apartment building decelerated in November, amid a decline in new orders, the report said.

Home building will need to accelerate in coming months if it’s to help offset the slowdown in mining construction.

“Perceptions regarding Australia’s short term economic outlook have dampened recently and today’s result will hardly buoy the prevailing mood,” HIA chief economist Harley Dale said.

“The rate of expansion in detached house and apartment building activity slowed in November.

“It will be disappointing if the rate of expansion in these components fails to re-accelerate in coming months given new home construction is currently the key domestic sector with promise of healthy activity in 2015.”

The slower pace of home building activity has also been reflected in official figures, including building approvals and weak GDP figures, Ai Group chief economist Julie Toth said.

“These data really underscore the fragile and sporadic nature of the current recovery in residential housing activity, especially as we move into the end of year shut-down period for much of the industry,” she said.