§ The national construction industry contracted at a slightly steeper pace in March with the Australian Performance of Construction Index (Australian PCI®) declining by 0.9 points to a 13-month low of 45.2 points.
§ It is the fourth consecutive month that the Australian PCI® has been below the critical 50 points level that separates expansion from contraction amid a continuation of soft overall demand conditions.
§ Across the four sub-sectors in the Australian PCI® , house building activity contracted for a second consecutive month in March, and at its sharpest rate in 14 months. The apartment building sector continued to expand, although growth was modest and well below the solid rates of increase seen over much of the second half of 2015.
§ Subdued conditions persisted in the commercial construction sector with activity close to stabilisation in March. Engineering construction meanwhile declined more steeply consistent with the on-going decline in mining and heavy industrial construction activity.
§ Across the construction industry, activity slipped further into negative territory while the new orders sub-index registered a fifth month of contraction, albeit at a slower pace. Reflecting these tough operating conditions, employment fell at its most pronounced rate in 15 months.
§ Australian PCI® respondents generally linked the subdued state of the industry to soft overall demand conditions, citing fewer new tender opportunities and strong competition for the available work.
§ There were also reports from apartment builders of a reduction in customer enquiries and a more cautious approach by prospective purchasers. Local council planning delays and tighter lending conditions for investors were other factors seen as constraining residential market conditions.
Note the big hit to employment. This index is going to get pounded over the next eighteen months as residential construction joins mining in the capex slump. 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.
