Construction Work Done — Q4 | By the numbers
- The total value of construction work done fell by 3.1% in Q4 to $51.092bn, against the market expectation for a 0.5% increase. Q3's initially reported fall of 2.8% was revised down to -3.6%.
- Across the categories in Q4;
- residential work fell by -3.6% to $18.88bn (+2.1%Y/Y)
- non-residential work lifted by +1.9% to $10.712bn (+0.4%Y/Y)
- engineering work declined by -5.0% to $21.493bn (-7.8%Y/Y)
Construction Work Done — Q4 | The details
The details showed the weakness during the quarter was broad based across the sectors and categories. Private sector construction work fell by 2.2% in the quarter to $39.168bn (-3.2%Y/Y), while the public sector posted a surprisingly sharp 6% fall in Q4 to $11.925bn (-0.8%Y/Y).
In the private sector, building work (including residential and non-residential construction) fell by 2.7% in the quarter to $26.222bn (-0.1%Y/Y). This fall was driven mostly driven by a 3.7% contraction in residential activity, in which new construction fell by 3.6% and alterations declined by 4%. Annual growth in residential work pulled back to +2.3% from +5.4% in the previous quarter.
Non-residential work in the private sector, including commercial projects such as offices and warehouses etc, eased by 0.2% in the quarter to $7.589bn but deteriorated further on an annual basis from -2.1% to -5.1%.
Private engineering work, which is a highly volatile component, declined by 1.3% in Q4 to $12.946bn to be 9.1% lower over the year.
In the public sector, engineering work posted a surprisingly steep fall of 10.3% in Q4 — its sharpest quarterly decline since 2000 — to $8.547bn. This followed a 2.6% decline in the previous quarter, however; given the strong pipeline of work in public infrastructure projects, this could be a soft patch ahead of a resumption in its upturn. Meanwhile, public building lifted by 6.9% in Q4 to $3.378bn, with annual growth running at a strong 14.2% pace.
The table, below, provides a breakdown of the state detail for Q4, inclusive of both the private and public sectors. When taken in conjunction with Q3's data, it becomes clear that activity in the residential sector was weak across the nation in the second half of 2018, and notably so in the three largest states of New South Wales, Victoria and Queensland.
Commercial work is generally faring better across the states, though that cannot be said for Queensland and Western Australia where the deceleration is gathering pace.
The engineering detail showed widespread weakness in Q4. The 6.9% fall in Western Australia (-19%Y/Y) indicates that unwinding investment in resources projects continues, though tomorrow's capital expenditure data should provide further insight here.
Construction Work Done — Q4 | Insights
This report is clear negative ahead of next week's National Accounts for Q4. In particular, it highlighted weak momentum in residential construction activity over the second half of the year, which follows a sharp deterioration in approvals. While residential construction activity was widely expected to slow over the coming quarters, risks of a sharper slowdown have risen. With construction activity to subtract from growth in the quarter, expectations for GDP growth in Q4 are likely to be lowered following on from soft leads from retail volumes and trade.
