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Engineering construction grows after 10 months of contraction

Engineering construction activity has posted its first growth in almost a year, representing a slowing of the Australian Industry Group — Housing Industry Association Australian Performance of Construction Index (Australian PCI) for the first time in 14 months.

While the national construction industry continued to decline in May, the rate of contraction was the slowest for more than a year, with the PCI rising by 10.4 points to 46.9, which is still below the key 50-point level that separates expansion from contraction.

The Australian Industry Group (Ai Group) associate director, Economics and Research, Tony Pensabene, said: “Despite the continued subdued state of the construction industry, the latest data provides evidence that the industry is starting to recover some ground following the significant deterioration during 2008 and the first quarter of 2009.”

Despite most sectors registering continued falls in activity, the rate of decline moderated for work undertaken on commercial, house, and apartment building projects, with engineering construction activity posting its first increase in the past 10 months.

On an aggregate industry basis both activity and new orders posted on-going declines in May, resulting in firms continuing to reduce their workforces although at a less marked rate than the previous month, the PCI said.

“This was particularly noticeable in the house building sector where the pace of decline in both activity and new orders eased markedly, with companies linking this to the positive impact of lower interest rates and the First Home Owners Grant Scheme. These developments are adding weight to the likelihood of firmer housing activity in coming months,” said Pensabene.

“There was also a better tone in other areas of the industry with work on apartment and commercial building projects exhibiting less marked rates of decline, while engineering construction moved back into positive territory, although the level of growth was marginal. Nevertheless, given the volatility of these sectors, it will be a few months yet before we can say that the industry is over the worst of the downturn.”

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