Today (11:30am AEST) sees the June quarter update of Australian construction activity published the ABS. Prior to the recent disruptions in the sector in certain states from pandemic restrictions, construction activity was building strong momentum. Activity increased at its fastest pace in 3½ years in Q1 and further strength is expected in Q2, led by the upswing in the residential construction cycle in response to stimulus measures and rising housing prices. Work done by the public sector is also expanding with state governments providing support to their economic recoveries.
In the March quarter, construction activity lifted by a stronger-than-expected 2.4% — its fastest quarterly increase since Q3 2017 (reviewed here). Growth through the year remained in contraction (-1.1%) but moderated from the previous quarter (-2.4%).
Work done in the private sector advanced by 1.7% in Q1 after a broadly flat (0.3%) outturn in the previous quarter. Driving this was the surging residential segment, with activity rising at its sharpest pace in 6 years, up 5.1% in the quarter (3.8%Y/Y). The stimulus measures from the HomeBuilder grants, first home buyer incentives and low interest rates combined with the upswing in housing prices to lift new home building by 4.1% in Q1 (1.8%Y/Y) after Q4's 3.1% rise. Renovation work continued to soar, up 11.3% in the quarter following a 10.8% rebound over the second half of 2020. Moderating this strength was weakness in the non-residential sector (-5.6%qtr, -17.6%yr) with investment in retail and office projects remaining weak in response to the pandemic. Engineering work lifted modestly in Q1 (1.6%) as growth through the year firmed from 2.6% to 3.4%.
In the public sector, activity increased by 4.3% in Q1 as it rebounded from a weak Q4 (-6.8%) but remained down on a year earlier (-1.0%). The gains were broadly based across engineering (3.1%) and building work (7.1%), supported by a lengthy pipeline of state and territory government projects.
Market expectations | Construction Work Done
The median estimate is for construction activity to have advanced by 2.8% in the June quarter between a range of estimates from 0.8% to 5.0%.
The median estimate is for construction activity to have advanced by 2.8% in the June quarter between a range of estimates from 0.8% to 5.0%.
What to watch | Construction Work Done
The focus remains on the upswing in the residential construction cycle. Stimulus from the HomeBuilder scheme and other measures drove detached house approvals to record highs, with the pipeline now being worked through. Alterations have also benefitted from policy stimulus, surging to their strongest level on record in Q1. More time being spent at home and robust conditions in the housing market have encouraged homeowners to make improvements.
The focus remains on the upswing in the residential construction cycle. Stimulus from the HomeBuilder scheme and other measures drove detached house approvals to record highs, with the pipeline now being worked through. Alterations have also benefitted from policy stimulus, surging to their strongest level on record in Q1. More time being spent at home and robust conditions in the housing market have encouraged homeowners to make improvements.
