Construction activity withers despite rate cut

Construction activity withers despite rate cut

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house construction
Building activity continued to shrink in February as an interest rate cut failed to boost the number of orders.

Australia’s building sector withered for the fourth month in a row even if the Reserve Bank decided to cut the cash rate to a new record low of 2.25 per cent, Australian Associated Press reported. The Australian Industry Group and Housing Industry Association’s barometer showed that building activity levels dropped two points to 43.9, which is well below the 50 level separating growth from decline as new orders plunge.

While apartment building posted the best reading since November 2014, detached housing activity dropped for the third straight month. Engineering construction also slipped, with the worst reading in nine months and resource industry projects were cut down, while commercial building activity also decreased.

AiG said February’s result suggested a slightly sharper rate of decline for the construction industry, as orders for commercial building and mining engineering construction experience sharper drops. The group added that construction and engineering activity were also inhibited by “a lack of public sector tenders and soft private sector investment.” The construction industry is declining as the house building boom cannot fill the hole left by mining, it said.

HIA chief economist Harley Dale concluded that, despite the easing of house building, residential construction was still relatively strong.



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