09/07/2008 - 15:08

Builder sentiment falls again

09/07/2008 - 15:08

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Construction industry hopes have suffered a blow, with Master Builders Australia's national survey revealing the fourth consecutive fall in builder sentiment in the June quarter.

Construction industry hopes have suffered a blow, with Master Builders Australia's national survey revealing the fourth consecutive fall in builder sentiment in the June quarter.

The Master Builders Building and Construction Index has fallen below 50 for the first time in four years, indicating that builders now expect a decline in building and construction activity.

"This survey is a finger on the pulse of the industry. What builders tell us through the survey has historically been a good indication of what lies ahead, and in this case, the future isn't looking rosy," MBA chief economist Peter Jones said.

"It is clear that tight financial conditions coupled with higher petrol prices are taking their toll. Along with the expected drop in building activity in the next six months, builders are anticipating a weakening in profitability which doesn't auger well for investment and employment.

"Builders are reporting a weakening in non-residential construction activity, a trend they anticipate will continue despite plans for massive investment in social and economic infrastructure revealed in this year's Federal Budget.

"The impact of interest rates on new contracts and forward orders has increased sharply in the past two quarters. This is being exacerbated by rising input costs, with an overwhelming majority of builders now expecting labour and materials costs to escalate significantly in the next six months.

"Builders see little prospect of any immediate recovery in the housing sector. More than 50 per cent of respondents have major concerns about housing affordability and more than 70 per cent believe housing affordability will deteriorate further in the coming year."

MBA's survey results follows Australian Bureau of Statistics data that showed growth in the owner-occupied housing finance fell by a seasonally adjusted 7.9 per cent in May, its fourth consecutive monthly drop.

Economists had expected a two per cent decline in May.

Other data issued today also suggested that consumers are less likely to be making a huge financial commitment such as a home loan in the near future.

The Westpac-Melbourne Institute consumer sentiment index dropped a further 6.7 per cent in July to its lowest level since January 1992.

Consumer sentiment has now slumped 34.6 per cent in the past year and at an index of 79.0 points it is just 7.1 per cent above the average in 1990 - the low point of the 1990-91 recession.

"These consistently weak reads are pointing to a period of very weak consumer spending and associated economic activity," Westpac chief economist Bill Evans said.

Continuing high interest rates, rising petrol prices, a drop in the share market and St George Bank's decision to lift its lending rates independent of an official rate move were all seen as unsettling consumers in the month.

 

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