▪ The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) declined by 2.5 points to 49.3 points (seasonally adjusted) in September.
▪ This fall in the Australian PCI® to a level below the critical 50-points threshold (that separates expansion from contraction) signalled the first contraction in overall construction industry conditions in 20 months.
▪ The activity sub-index expanded modestly in September after moving into mild negative territory (i.e. below 50 points) in August. However, the new orders sub-index contracted amid weaker demand conditions across all four industry sub-sectors. This was associated with a further decline in employment which recorded its sharpest fall in 21 months.
▪ Across the four sub-sectors in the Australian PCI®, house building declined for a second consecutive month and at the steepest rate in just over two years while apartment building recorded a seventh month of contraction.
▪ Engineering construction was the strongest performing area of activity with its rate of growth lifting solidly in the month on the back of an expanding pipeline of publicly funded investment in large-scale infrastructure projects. However, commercial construction was again subdued, remaining in slight negative territory for a third consecutive month.
▪ House building respondents to the Australian PCI® linked the weakening in demand conditions to tighter lending conditions, reduced enquiries and softer home buyer sentiment.
▪ Apartment builders indicated that activity remained in decline in response to project completions, falling investor demand and oversupplied markets.
Time for some more light rail to nowhere. 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.
