Thursday, 8 January 2009

Australian Economic Roundup

If you want a quick gauge of economic activity in Australia it's worth visiting the Australian Industry Group's Economic sector survey's at the beginning each month. Firstly lets take a look at the Manufacturing sector:

  • Manufacturing activity fell for a seventh month in a row in December, though at a slightly slower pace than in November. Capacity utilization fell to its lowest level in 16 years.
  • The seasonally adjusted Australian Industry Group-PricewaterhouseCoopers Australian PMI® rose, by 1.0 points, to 33.7, still well below the 50 point mark separating expansion from contraction.
  • All components remained below 50 points indicating falls in the levels of each indicator. New orders and employment fell, though at a slower rate than in November, while production, inventories and supplier deliveries fell faster than in November.

Secondly the Service sector:
  • Persistent weak demand led to a ninth consecutive monthly decline in services sector activity in December.
  • The seasonally adjusted Australian Industry Group/Commonwealth Bank Performance of Services Index (Australian PSI®) rose marginally, by 1.5 points to 39.3, but remained below the key 50.0 level separating expansion from contraction.
  • The slight moderation in the rate of decline in services activity was largely due to softer falls in the property & business services and transport & storage sectors. This largely reflected a marginal improvement in the property market; demand for transport services in the lead-up to Christmas; and lower fuel costs.
  • Sales, new orders and inventories all decreased at a slower rate in December, with the pace of job-shedding remaining broadly steady. Capacity utilisation rose slightly, while input cost increases moderated further.
Finally the Construction sector:
  • The national construction industry registered a further decline in December, as firms continued to be severely affected by the economic and financial crisis and deteriorating demand.
  • The further fall in construction activity was attributed to poor demand conditions and a lack of new project work. This was mainly linked to the adverse state of economic and financial conditions and negative client sentiment. It was also noted that intense competition for new contracts had persisted, resulting in a high failure rate for tenders and diminishing order books.
  • The seasonally adjusted Australian Industry Group/Housing Industry Association Performance of Construction Index (Australian PCI®) fell by 1.1 points to 30.9, to remain below the critical 50 points no-change level for a 10th consecutive month.
  • The latest decline was underpinned by continued falls in activity across all major sectors. House building remained the worst performing sector (although its reduction was less marked than the previous month), while rates of decline picked up in engineering and commercial construction.

Manufacturing has been contracting for 7 straight months, the service sector for 9 months and the construction industry for 10 months. However the RBA and most goldilocks economists think we will avoid recession.....OK then.

Also out today, building approvals fell a seasonally adjusted -12.8% in November and are now -35% lower than they were one year ago. The level of building approvals has fallen back to levels last seen in March 2001. So what does all this mean? The recession train has clearly left the station folks.