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Creation Date: Fri, 05 Aug 2011 GMT

Australian construction slump continues

The Australian Industry Group - Housing Industry Association Performance of Construction Index rose 0.3 points to 36.1, but remains a long way below the 50-point level that separates expansion from contraction.

All four sectors of the building industry posted sharp contractions, although house building was the worst, falling 5.6 points since June to 28.5 - the steepest pace contraction in two and a half years.

Apartment building (34.9), commercial construction (37.4), and even the mining-linked engineering sector also recorded big declines.

However, at 38.8, the engineering sector had the slowest pace of contraction.

In bad news for the future outlook, the new orders sub-index registered 31.6, which indicated an accelerating pace of decline.

Australian Industry Group director of public policy Peter Burn says the fall in new orders gives the industry little hope of a rapid turnaround.

"Consumer caution and the fear of further interest rate rises are dampening activity in residential construction," he noted in the report.

"The commercial construction sub-sector is suffering as low levels of private sector activity are not making up for the withdrawal of government-backed projects."

Housing Industry Association economist Matthew King says there is no sign of any improvement in residential construction to address Australia's housing shortage.

"The ongoing acceleration of the decline has activity in this sector quickly headed for GFC lows," he warned.

"Meanwhile, as uncertainty continues to seep into the economic fabric of the US and eurozone, apartment construction stands little chance of transitioning into expansive territory in the near term

Source: www.abc.net.au/news