Australian Building Industry Shrank for 10th Month in December

By Jacob Greber

Jan. 8 (Bloomberg) -- Australia’s construction industry shrank in December for a 10th month as demand for new houses waned amid a slump in consumer confidence and banks cut lending.

An index measuring construction fell 1.1 points to 30.9 from November, according to a report by the Australian Industry Group and Housing Industry Association released in Sydney today. A reading below 50 shows construction contracted.

Signs the property market is contracting were among reasons central bank Governor Glenn Stevens cut the benchmark interest rate last year by three basis points to 4.25 percent, the biggest reduction since a recession in 1991. House prices dropped in the third quarter by the most since 1978.

“We are continuing to see conditions deteriorate,” said Tony Pensabene, an associate director of economics at the Australian Industry Group.

Builders “are being hit hard by the lack of credit availability and a reluctance by clients to commit to new projects,” Pensabene added. “The current weakness is likely to persist” this year.

A gauge of commercial building slumped to 27.5 points from 45.9 in November, today’s report showed. Engineering fell to 26.1 points from 38.2, while a measure of home construction rose to 23.4 from 20.3.

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