Construction PMI up for two months!

The third in the AIG’s PMI series is out today and construction has made it two months in row of expansion:

The national construction industry continued to grow in July, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) increasing by 0.8 points to 52.6 points (seasonally adjusted). This was above the critical 50 point level that separates expansion from contraction, signalling industry-wide expansion for a second consecutive month and at a slightly faster pace than in June.

• It was the Australian PCI®’s strongest monthly performance since November 2013, when it reached 55.2 points.
• Conditions in July were supported by a welcome strengthening in activity and an upturn in employment, which expanded for the first time in eight months. New orders also continued to grow, although the rate of increase moderated in the month.
• Growth was recorded across three of the four construction industry sectors. Commercial construction recovered strongly (after contracting over the previous three months) to be at its highest level in 6½ years. This is consistent with the recent uplift in non-residential building approvals. The apartment building sector also recorded renewed growth. House building continued to expand, although its rate of growth moderated from the five-month high level reached in the previous month. In contrast, engineering construction returned to negative territory (under 50 points) after expanding in June.
• Businesses reported an improvement in tender opportunities this month, with many securing new work. House and apartment builders indicated relatively solid customer enquiries and sales, despite some easing in the month. However, the operating environment remains tough for many construction businesses with subdued public sector building activity and a decline in mining-related construction activity still being cited as key negative influences on activity.

Activity was led by commercial. Houses and apartments are easing back:

New orders were the same:

I continue to think that this index is either inappropriately weighted or has insufficient exposure to mining given the greatest engineering construction boom in the nation’s history registered as a recession in 2011/13 and its bust is registering as growth.

Nonetheless, it will be welcomed today with great fanfare today by the powers that be.

Full report here.