Australian construction sector activity shrinks for the fourth straight month

Activity in the Australian construction sector shrank for the fourth straight month in September after the sector was hit by weak demand following government stimulus reduction.

The latest Australian Industry Group Australian / Housing Industry Association Performance of Construction Index (PCI) was down 2.4 points at 40.8 in September, well under the 50 point level marking expansion from contraction.

AI Group director public policy Peter Burn said today that the sector was suffering weak demand, particularly in the house construction sub-sector and warned the Reserve Bank of Australia (RBA) to refrain from hiking the interest rate.

"Construction companies continue to be plagued by weak market demand and on-going delays in project starts as private demand struggles to fill the gap left by the drying up of projects funded by fiscal stimulus measures," he said in a statement.

"The weakness across the construction industry in September and the discouraging near-term outlook reflected in low levels of new orders provides further evidence that the decision of the Reserve Bank not to raise interest rates was appropriate.''

"Higher interest rates would be a further set back for the industry which is already suffering from a lack of demand and is trimming its labour force accordingly."