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Australian Construction Contracts Fastest Pace in 11 Mths

Australia’s building industry shrank in August at the fastest pace in 11 months, led by a slump in apartments and weaker engineering construction as resource industry demand wanes, a private gauge showed.

The construction performance index fell to 32.2 last month from 32.6 in July, a survey by the Australian Industry Group and the Housing Industry Association released in Sydney today showed. A reading below 50 represents a contraction.

Australia’s housing industry is struggling even after the Reserve Bank lowered its benchmark borrowing cost by a total of 1.25 percentage points from November to June. Prices for iron ore tumbled this quarter as growth slows in China, Australia’s largest trading partner, and today’s survey showed engineering construction companies cited the impact of weaker demand in the resources industry and project delays.

“The near-term outlook for the construction sector deteriorated with a further fall in new orders,” said Peter Burn, the Australian Industry Group’s director of public policy, said in a statement. “The drop-off in new orders was particularly sharp for engineering construction and the apartment sub-sector.”

Construction of apartments plunged 10.8 points to 22.1 and engineering slid 3.8 points to 35.7, today’s report showed. House building rose 3.5 points to 31.5 and commercial construction gained 7.9 points to 34.

New orders dropped 5.8 points to 28.1, while a gauge of employment rose 3 points to 35.4 last month, it showed.

BHP Billiton Ltd., the world’s biggest miner, last month decided to delay approval of an estimated $33 billion expansion of the Olympic Dam copper, uranium and gold mine in South Australia. Fortescue Metals Group Ltd. (FMG), Australia’s biggest iron ore producer after Rio Tinto Group and BHP, this week cut its full-year capital spending forecast by 26 percent to $4.6 billion.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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