The construction industry has begun the year on a weak footing, with activity shrinking again in bad news for the broader economy.
The Performance of Construction Index slumped 0.5 points to 46.3 in January, remaining below the 50-point level separating expansion from contraction.
Ai Group head of public policy Peter Burn said the sector had become increasingly dependent on robust residential construction and, in particular, apartment building in recent months.
But apartment activity dropped dramatically in January, and new orders declined across all four construction sub-sectors, the Australian Industry Group and Housing Industry Association results show.
“(This) suggests that construction may not play the leading role in rebalancing the broader economy that it played in 2015,” Burn said.
Apartment building returned to negative territory after six months of expansion, but commercial construction was the weakest sub-sector in the month, contracting at the sharpest rate since July 2013.
Meanwhile, engineering construction also remained subdued while house building recorded a second month of growth.
HIA economist Diwa Hopkins tipped new home construction and apartments, in particular, to pull back from the record levels experienced in 2015.
She said conditions in commercial and engineering construction look set to remain sluggish in the coming months in an environment of softening residential building activity.
“We need to see evidence of a recovery in non-residential construction but as yet, the Australian PCI suggests that the weakness of 2015 will persist into early 2016,” she said.