The pace of the slowdown squeezing construction eased for the second consecutive month, offering hope for the hard-hit sector.
The Australian Industry Group-Housing Industry Association performance of construction shrank to 36.5 index points in April, a 6.2 point improvement from March. The index nudged higher for the second straight month but remains under the 50 point mark separating growth from contraction.
"There's some hope that the downturn in the housing sector may be bottoming out, with new orders declining at a less rapid rate, and the fall in activity considerably less pronounced than the situation in late 2008," said Australian Industry Group associate director for economics and research Tony Pensabene.
The index has been below the 50 point mark since March of last year. In that time, the housing industry has been beset by the lingering effects of 12-year high interest rates, the credit crunch, and now recession fears for potential buyers.
April's result "would appear to reflect the positive flow through impact of lower interest rates and the First Home Owner Grant, and provides signs of firmer housing activity in ensuing months," said Mr Pensabene.
Permits for new homes rose 3.5%, seasonally adjusted, in March, official Australian Bureau of Statistics data showed this week. The bulk of the approvals came from private house approvals, an area the Government targeted in its October $10.4 billion stimulus package.
The Government and the Reserve Bank are keen to resuscitate the housing sector because of the demand and jobs it creates.
Official jobs numbers released today showed unemployment fell to 5.4% in April from 5.7% in March, defying analysts' expectations and fueling speculation a recovery may be in sight, albeit at a distance.
Mr Pensabene said the slowing pace of contraction in the April performance of construction index stemmed from the engineering and commercial construction sectors.
"Both sectors registered their least marked falls since November 2008."
The engineering subindex stood at 37.1 index points in April, higher than 24.2 points in March. The commercial construction subindex hit 37.2 index points in April, rising from 30.4 index points in March.
czappone@fairfax.com.au
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