Australia's Construction Index Shrinks for Fifth Month in July

By Jacob Greber

Aug. 7 (Bloomberg) -- Australia's construction industry contracted for a fifth month in July as borrowing costs at a 12- year high eroded demand for houses and apartments.

An index measuring construction rose to 41.6 points last month from 40.3 in June, according to a report by the Australian Industry Group and Housing Industry Association released in Sydney today. A reading below 50 indicates the construction industry is shrinking.

The slide in building work supports central bank Governor Glenn Stevens' assessment that economic growth is slowing enough to cool inflation that has jumped above his target range of 2 percent to 3 percent. Stevens left the benchmark rate unchanged at 7.25 percent this week and signaled he may cut borrowing costs for the first time in almost seven years in coming months.

``While housing and apartment building remain very weak, the decline in commercial construction is showing incipient signs of improvement,'' said Tony Pensabene, an associate director of economics at the Australian Industry Group.

Today's survey is based on responses from about 120 construction companies on sales, new orders, deliveries, employment and input costs.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net