Construction PMI going nowhere

Where on earth is the RBA’s construction boom?

The seasonally adjusted Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) registered 45.9 points in January 2015 (readings below 50 points indicate contraction). This was an increase of 1.5 points from December 2014. It indicated a slower rate of decline for the construction industry and a subdued start to 2015 across all four construction sub-sectors.

 January was the third 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 mid-2014.

 The slightly milder decline in the Australian PCI® in January was mainly due to a less pronounced reduction in construction industry employment this month.

 However, reflecting the recent softening in overall industry conditions, activity, new orders and deliveries from suppliers declined at about the same rates as in December.

 All four sub-sectors of the Australian PCI® contracted (i.e. below 50 points) in January. Steeper rates of decline were evident in both housing and apartment building activity. Engineering construction continued to exhibit weakness, contracting for a seventh consecutive month. Commercial construction also declined, but conditions moved close to stabilisation.

 Respondents to the Australian PCI® said that the industry’s weak start to 2015 was due to a further contraction in mining related construction work and unseasonably wet weather conditions. House builders noted a further easing in customer enquiries and sales. More positively, there were reports of a lift in demand for commercial development projects.

This index was in recession through the mining boom, clearly illustrating that it is heavily weighted towards housing and commercial construction.

Now it’s contracting when residential is supposed to be booming. I’m at a bit of a loss, to be honest. Full report.