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Residential construction booms

Australia’s construction recovery slowed at the end of last year, but the sector continued to grow.

After several years of contraction, the building industry finally swung back to growth in October this year, and has been expanding since.

However, the Australian Industry Group’s December Performance of Construction Index fell 4.4 points to 50.8 – only just above the 50-point level that separates expansion from contraction.

The fall was driven engineering construction, which slipped 6.4 points to 46.1 to be back in contractionary territory after two months of growth.

The Ai Group’s director of public policy, Peter Burn, says the decline in engineering is to be expected as the mining construction boom wanes.

“In line with the easing of the mining investment boom, engineering construction was weaker in December and, with further falls in store, the time is ripe for a much more decisive focus on building new and upgrading existing transport infrastructure,” he noted in the report.

In a positive sign that record low interest rates are boosting the domestic economy, home building continued to grow strongly.

The house building sub-index rose 1.5 points to 63.5, and is sitting just off an eight-year peak reached in October, while apartment building activity expanded at a slower pace – the sub-index dipping 1.9 points to 56 in December.

Peter Burn says there are signs the growth in residential construction will continue through 2014.

“Low interest rates are clearly having their long-awaited impact and the continued growth of new orders means that builders – and the manufacturing and service industries that are linked to the commercial and residential construction sectors – can look forward to 2014 with a greater degree of confidence than prevailed only a few months ago,” he added.

Commercial construction slowed last month, but at 50.8 it was still expanding slightly.

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