The national construction industry continued to decline in November with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) registering 46.6 points in the month (50 points is the threshold that separates expansion from contraction in the Australian PCI®). This was an increase of 0.7 points from October, indicating a slightly slower rate of decline for the construction industry as a whole.
The milder contraction in the Australian PCI® in November was due to less pronounced reductions in new orders and deliveries from suppliers. However, activity fell at a steeper rate, while employment returned to contraction with businesses attributing this to overall sluggish demand conditions.
All four sectors of the Australian PCI® contracted (i.e. below 50 points) in November. Apartment building declined for a third consecutive month, although at a rate that was slower than in October. House building recorded a fourth month of contraction, highlighting the sector’s recent softening from more robust mid-year activity levels.
Engineering construction fell further into negative territory in November, recording its lowest activity reading (and therefore sharpest rate of contraction) in 13 months. Commercial construction fell for a fourth month, although conditions in this sector moved close to stabilisation in November.
Residential builders reported an easing in customer enquiries and lower sales in November. However, activity continued to receive solid support from on-going projects while investor activity was seen as remaining relatively firm in the month.
There were some reports of a lift in project commencements in the commercial construction sector, although it was generally noted that conditions were patchy across states and major building categories. Engineering construction businesses reported a further winding back in mining-related investment which outweighed strengthening demand from new infrastructure work.
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.
