Australia’s construction industry held near an eight-month low in June as interest-rate reductions failed to stem a slide in apartment building, a private gauge showed.
The construction performance index was 34.8 last month compared with 34.7 in May and has contracted for 25 consecutive months, a survey by the Australian Industry Group and the Housing Industry Association released in Sydney today showed. A reading below 50 represents a contraction.
The Reserve Bank of Australia lowered the nation’s benchmark borrowing cost by a total of 75 basis points in May and June to 3.5 percent, before keeping rates unchanged this week saying recent reductions will help the economy weather a more subdued global outlook. Today’s report showed residential and commercial construction remained weak and apartment building recorded its steepest fall in 10 months.
The data “confirm that new home building conditions will deteriorate further in the second half of 2012,” Harley Dale, HIA’s chief economist, said in a statement. “Residential construction activity looks set to trough at GFC-equivalent levels and yet we’re not in the midst of the GFC. That is a concerning update on Australia’s economic prospects and policy makers should heed this clear signal for policy action.”
Construction of apartments fell 4.9 points to 21.8, while house building rose 2.5 points to 30.7, today’s report showed. New orders fell 0.3 point to 33.4, while a gauge of employment rose 0.3 point to 38.7 last month, it showed. Engineering construction fell 1.4 points to 39.9, according to the survey.