Australian construction activity data for the September quarter are due to be published by the ABS today at 11:30am (AEDT). Construction activity is expected to have fallen sharply in Q3 due to the sector being heavily affected by restrictions following the winter outbreaks of the Delta variant. Meanwhile, shortages of labour and materials were an increasing constraint for the sector, in particular in the residential segment.
The uplift in construction activity over the first half of the year was a strong 2.4%, though the momentum faded in Q2 as output growth slowed to 0.8% from Q1's 2.4% increase. Activity was broadly level through the year (0.4%) but had more than recovered from 2020's pandemic-driven decline on the back of significant stimulus measures.
The slowdown seen in Q2 was driven by the residential segment as the volume of private sector work completed was down 0.2% for the period after surging by 5.9% in Q1. New home building posted a 0.1% fall after lifting by 4.7% in Q2 while alterations were down 0.6% off a 12.8% rise in the prior quarter.
The range of stimulus measures from the HomeBuilder grants, first home buyer incentives, low interest rates and the tailwinds from rising housing prices has led to a substantial rise in the residential construction pipeline. Strong demand was starting to run up against labour and materials shortages, slowing the pace at which projects were being worked through.
Private non-residential construction was still contracting in response to the COVID recession with firms cutting or delaying projects, though Q2's decline of 0.4% was much more modest than in the past few quarters.
Public sector construction activity lifted strongly by 3.2% in Q2. This was supported by rises in both engineering (3.8%) and building work (2.1%) as state governments accelerated the rollout of projects to drive local recoveries. This was spilling over to the private sector, which had seen a 2.7% rise in engineering activity over the first half.
Market expectations | Construction Work Done
Construction work done is expected to have fallen by 3.0% for the quarter according to the market median, with the range of forecasts between -6% to 0.5%. During the quarter, temporary industry-wide shutdowns occured in Sydney and the surrounding areas, Victoria and South Australia.
Construction work done is expected to have fallen by 3.0% for the quarter according to the market median, with the range of forecasts between -6% to 0.5%. During the quarter, temporary industry-wide shutdowns occured in Sydney and the surrounding areas, Victoria and South Australia.
What to watch | Construction Work Done
Today's report will provide a strong lead on the expected hit taken by residential construction from the winter lockdowns ahead of next week's Q3 GDP data. Increasing capacity constraints from labour and materials shortages are also likely to have been headwinds. Non-residential work will have been hit hard by the restrictions placed on construction sites and the movement of workers between sites.
Today's report will provide a strong lead on the expected hit taken by residential construction from the winter lockdowns ahead of next week's Q3 GDP data. Increasing capacity constraints from labour and materials shortages are also likely to have been headwinds. Non-residential work will have been hit hard by the restrictions placed on construction sites and the movement of workers between sites.
