The AIG construction PMI is out and fell in January back into contraction:
The national construction industry has started 2014 on a weaker footing, contracting slightly in January following three consecutive months of growth.
The seasonally adjusted Australian Industry Group/ Housing Industry Association Australian Performance of Construction Index (Australian PCI®) declined by 2.6 points to 48.2 in January, placing it below the critical 50 points level that separates expansion from contraction.
This softer result was driven by a renewed decline in new orders which contributed to a steeper fall in employment and a continued reduction in deliveries from suppliers. The overall level of industry activity expanded, although the rate of increase was marginal and broadly unchanged from the previous month.
There were mixed performances across the major industry sectors. House building remained the strongest performing sector, although its expansion moderated to its slowest pace in the past five months. Activity in both the apartment and commercial construction sectors declined after growth over the previous four and three months respectively. In contrast, engineering construction expanded, recovering from a contraction in activity at the end of 2013.
Respondents said that easing demand conditions, tight credit conditions and a lack of public sector tenders had largely contributed to the decline in new orders in January. House builders pointed to customer enquiries and buyer confidence holding up reasonably well in January, despite some slowing in new orders. Investor interest in the housing market was also said to have remained solid in the month.
Production was mixed:
New orders fell harder but houses are still strongly positive:
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AIG blamed mining for the engineering fall but it’s been my long term view that this survey under-represents mining (is does the NAB and D&B surveys). Given the boom we’ve just had why would engineering have been contracting for years?
A weakening report but not a trend breaker as yet. Full report here.
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.
