Construction activity up for 2nd month

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Activity in Australia's construction sector is strengthening, driven by higher housing prices and improved confidence in the labour market.

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (PCI) rose 0.8 points to 52.6 in July.

An index reading above 50 indicates activity in the sector is rising and the higher the reading, the greater the speed of the expansion.

Ai Group director of public policy Peter Burn said both residential and commercial construction were building a head of steam.

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"The overall construction sector remained in positive territory despite the ongoing slowdown in engineering construction as investment in mining-related projects fades," he said.

"While house building has been strong for some time and apartment building is at healthy levels, the broadening of growth to include commercial construction is a welcome addition to the mix."

Housing Industry Association chief economist Harley Dale said a stronger construction sector is a tick in the box for the overall economy.

"Labour market outcomes, as well as economic growth will be assisted in 2014/15 by Australia's construction industry, led by what is already a strong recovery in new home building activity," he said.

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Construction activity up for 2nd month