The seasonally adjusted Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) fell by 0.5 points to 46.3 points in January. This indicated a broadly unchanged rate of contraction from December.
§ It is the second consecutive month that the Australian PCI® has been below the critical 50 points level that separates expansion from contraction, following the industry’s return to growth in August 2015.
§ Across the four sub-sectors in the Australian PCI® , apartment building returned to negative territory following six months of expansion. House building meanwhile recorded a second month of growth, albeit at a slightly slower pace.
§ Commercial construction was the weakest performing area of construction activity, contracting at its sharpest rate in 3½ years. Engineering construction activity also remained subdued, declining at a broadly unchanged rate from the previous month.
§ For the construction industry as a whole, activity and new orders recorded slightly steeper declines in January while supplier deliveries turned down following two months of growth. Employment edged higher in January, although the pace of growth was the second slowest in six months.
§ Australian PCI® respondents generally linked the subdued state of the industry to soft overall demand conditions, citing a lack of new work to replace projects completed at the end of 2015 and a continued winding back in mining and heavy industrial construction work.
§ Reports from residential builders were mixed. While house building respondents to the Australian PCI® were generally positive in their assessment of activity levels, a softening in apartment conditions was apparent with reports of fewer enquiries in the month and increased caution by would-be purchasers.
Still too early to expect a complete rollover though apartments activity fell sharply:
Importantly, employment is still trending up:
Expect it to roll in the next quarter or so. Full report.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
The seasonally adjusted Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) fell by 0.5 points to 46.3 points in January. This indicated a broadly unchanged rate of contraction from December.
