Construction PMI makes for ugly August hat-trick

From the AIG comes the third of its PMIs, construction:

The national construction industry moved back into contraction in August, with the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) dropping 5.0 points to 46.6 points in the month (50 points is the threshold that separates expansion from contraction).

 In the two residential sub-sectors in the Australian PCI®, house building fell into contraction (below 50 points) following three months of expansion, while apartment building lifted into expansion after edging lower in July.

 Engineering construction expanded for the second time in three months, on the back of higher levels of non-mining infrastructure work. Commercial construction activity also remained in positive territory, expanding for the third consecutive month.

 For the construction industry as a whole, activity expanded modestly in August after stabilising in July. However, new orders and deliveries from suppliers fell back into negative territory.

 Reflecting the deterioration in operating conditions, construction employment declined in August following two months of growth.

 Reports from residential builders were mixed. Although apartment building respondents to the Australian PCI® were generally positive about their current activity levels, a weakening in house building conditions was apparent, with reports of a drop in new orders and customer enquiries about house constructions in August.

 The rise in engineering construction was attributed by some businesses to an upturn in infrastructure activity, particularly transport projects in NSW.

 Reports from Australian PCI® survey respondents also indicated on-going pressures from a highly competitive pricing environment and tight margins.

It appears the housing sales and approvals peak we’ve seen for some time now is beginning to filter through to activity. We can expect apartments and engineering to keep giving (the latter being much more exposed to urban civil than mining in this index) for a while yet. Full report.