Construction recession deepens and spreads across all AU sectors | Metals Mine

  • Construction recession deepens and spreads across all AU sectors

    From abc.net.au

    The slowdown in Australia's construction industries has intensified, with a far sharper than expected contraction over the second quarter. In seasonally adjusted terms, overall construction work fell by 3.8 per cent over the three months, well short of the more optimistic, but still weak, market forecast of a 1 per cent decline. Over the year, construction work has fallen by more than 11 per cent, with the total level of work done down to a level last seen more than two years ago. As expected, residential construction was the biggest drag, down 5.1 per cent for the quarter and almost 10 per cent for the year. It is ... (full story)

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EventsTrader
Aug 27, 2019 10:54pm
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Uh oh.
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residential construction was the biggest drag, down 5.1 per cent for the quarter and almost 10 per cent for the year.
That's signaling a lot more than just weakness in construction.

Lower demand for new homes. In the past 25 years as Aussies have migrated to the bigger cities, new housing construction has involved mostly apartments, not single family homes. This has caused the domestic construction sector to grow as well. The Construction sector has grown too big for the economy to withstand a 'construction recession.'

Labor market weakness ahead. Last time I checked over 1 million Australian jobs were in construction. If construction slows, than a lot of jobs are at stake. The one area of strength the RBA has been clinging to is about to show some deterioration in the coming months. An Australian construction slowdown is a leading indicator of the broad labor market weakening.

Why are interest rate expectations so skewed to a neutral stance in policy? I'd expect more to expect a cut after the RBNZ followed the surprise RBA hold with a shocking 50 basis point cut. There's no way the RBA isn't thinking of easing as long as China continues to show slowing down, on top of the tariff and trade disputes. Australia is too dependent on China for every other central bank to express concern, but not them. It's not adding up.

RBA Rate Indicator:
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