The Australian construction industry has marked its third consecutive year of decline, with the latest Australian Industry Group/Housing Industry Association report confirming the sector is still continuing to contract.

The Australian Performance of Construction Index (Australian PCI) remained broadly unchanged at 35.3 points, where anything below 50 marks a contraction, and the distance from 50 indicative of the size of the contraction.

"The construction industry continues to languish due mainly to historically low levels of building activity. This is now being compounded by reductions in engineering activity related to mining-related investment which had been driving the industry,” Ai Group’s Director Public Policy Peter Burn said.

Industry Association Chief Economist, Harley Dale, said: "A sharper decline in the house building sector, together with a flat result for apartments at a very low index reading, unfortunately confirms the on-going sluggish nature of residential construction activity. Some leading indicators point to a very modest uplift in new home building activity, from a recessionary starting point.”

Australian PCI® Key Findings for May:

  • The seasonally adjusted Australian Industry Group/ Housing Industry Association Australian Performance of Construction Index (Australian PCI®) registered 35.3 in May. This is just 0.1 points above the reading in April and slightly below (2.7 points) the average level of the past three years.
  • The May reading marks the 36th consecutive month that the index has been below the critical 50 points level (that separates expansion from contraction).
  • The new orders sub-index fell by 2.9 points to 34.8.
  • The house building sector weakened for a third consecutive month with activity recording the sharpest rate of contraction in eight months (30.4). In contrast, commercial construction activity declined at a slower pace (37.5) while rates of contraction in apartment building (34.5) and engineering construction (34.3) were unchanged on the previous month.
  •  The recent pick-up in building approvals and housing finance has yet to translate into an improvement in overall levels of activity.