The much-vaunted housing construction boom has finally pushed its PMI out of recession for the first time this year:
The national construction industry expanded in June for the first time this year. The seasonally adjusted Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) increased by 5.1 points to 51.8 points in the month (readings above 50 points indicate expansion). This was the highest reading for the index since November 2013 (55.2 points).
The upturn in the Australian PCI® in June reflected a return to growth in activity, new orders and deliveries from suppliers. However, a further contraction in employment provided evidence that a tough operating environment persisted.
By sector, June’s growth was led by house building which expanded for a tenth consecutive month, and at a rate that was the strongest in five months. Engineering construction also expanded (albeit marginally) following declines in five of the previous six months. In contrast, apartment building activity weakened, falling back into negative territory after solid growth outcomes in the previous two months. Conditions in commercial construction were stable for a second consecutive month.
House builders were mainly positive, noting that customer enquiries had remained reasonably firm in the month, with some businesses also benefitting from the release of land for new housing developments. However, on a broader industry front, a range of factors continued to weigh on business conditions. This was typified by the wide reporting of a lack of public building activity, tough competition for the available work and soft investment activity by clients.
New orders were better across the board, though in commercial and engineering it was a slowing in falls:
Employment isn’t doing much but is grinding towards expansion:
I remain of the view that this index, like so many in the country, is under-exposed to mining so is not capturing the full downdraft from major project wind downs. It’s good news as far as it goes.
Full report here.
