6 Mar 2010

Construction recovery continues at slower pace

8:05 am on 6 March 2010

Activity in the Australian building and construction industry grew for a second month in February, but the rate of expansion slowed.

The Performance of Construction Index by the Australian Industry Group and the Housing Industry Association fell 4.9 points to 52.8 last month.

The level separating expansion from contraction is 50 points.

The ABC reports the slower pace of growth was linked to fewer new contracts and in some cases, the completion of existing work.

A slump in the apartment building sector also affected demand during the month.

Group public policy director Peter Burn says the result shows a continued trend towards improvement, since the low point in the index a year ago.

But Dr Burn warned that higher interest rates and the risk of further increases could seriously curb growth in the months ahead.

The Housing Industry Association also says continued expansion may be short lived.

Senior economist Ben Phillips says the recovery will be tested later in 2010 as social housing and first home buyer activity declines and interest rates increase.