▪ The national construction industry expanded for an eighth consecutive month in September, although the pace of growth moderated slightly from August.
▪ The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) fell by 0.6 points to 54.7 points in September to signal a positive but somewhat slower rate of overall growth (readings above 50.0 points indicate expansion with higher numbers indicating a faster pace of expansion).
▪ Across the four sub-sectors in the Australian PCI®, engineering construction and house building continued to drive industry growth. Consistent with the ramp-up in government infrastructure spending, engineering construction activity was again robust in September with the sector expanding for a sixth consecutive month. The house building sector also expanded solidly and at a rate that was broadly unchanged from August.
▪ Commercial construction activity remained stable in September although new orders continued to hold at relatively firm levels. In contrast, apartment building fell further into negative territory with the sector’s activity sub-index contracting at is sharpest rate in seven months.
▪ Australian PCI® data for September showed that both activity and new orders continued to rise, although rates of growth moderated in comparison with August. In line with the sustained growth in aggregate industry demand and activity, deliveries from suppliers expanded at their highest rate in three years. Businesses also lifted their workforces with employment increasing at its second highest pace in eight months.
▪ Respondents to the Australian PCI® were generally positive in their assessment of house building activity, citing relatively solid demand conditions and a high degree of support from on-going projects. However, reports from apartment builders pointed to a further softening in activity due to weaker new orders, a reduction in investor activity and the completion of some major projects. The rise in engineering construction was again linked to the upturn in nonmining infrastructure as the roll-out of major new road and rail projects gathers pace.
It will be a good index to watch for the Botox Boom. It is terrible for national activity but over-exposed to east coast. Apartments look cooked:
Next to fall will be houses then commercial then engineering is my best guess.
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.
