Construction Work Done — Q2 | By the numbers
- Construction activity fell by 3.8% in Q2 to $48.778bn, a sizeable downside miss on the median forecast for a 1% fall. Work done in Q1 was revised to show a larger fall of 2.2% compared to the initially reported decline of 1.9% decline. The contraction in activity through the year accelerated to -11.1% from -6.1%.
- The headline results in Q2 were;
- residential work fell by -5.1% to $18.033bn (-9.6%Y/Y)
- non-residential work declined by -6.6% to $10.473bn (-3.3%Y/Y)
- engineering work contracted by -1.1% to $20.271bn (-15.9%Y/Y)
Construction Work Done — Q2 | The details
Breaking down the details, private sector work in aggregate fell for the 4th consecutive quarter in Q2 after slowing by 4.7% to $37.498bn. Activity over the past year slumped to -10.5% from -4.5%.
Within this, residential activity fell by 5.1% in Q2 -- its 4th straight quarterly decline -- to $17.832bn as the contraction over the past year intensified sharply to -9.5% from -1.6%. The turning point in the cycle occurred in Q3 last year and activity has continued to pull back ever since. In Q2, dwelling construction fell by 5.3% -- its 4th consecutive quarterly fall -- to be -9.9% through the year (houses -5.5% in Q2 and -8.9%Y/Y; units -5.1% in Q2 and -11.2%Y/Y), while alteration work fell by 3.3% in the quarter and by -5.8% year-on-year.
Commercial or non-residential building work (including offices, shops and warehouses etc) posted a particularly sharp 7.3% contraction in the quarter to $7.598bn to be down by 3.8% over the year. While non-residential approvals have slowed since the second half of last year, there is still a reasonably strong pipeline to work through. Meanwhile, private engineering (infrastructure) work fell by 2.5% in the quarter to $12.068bn to be down by 15.7% over the year, likely an indication of residual weakness in the mining sector associated with completing projects.
In the public sector, total construction activity was down for the 4th straight quarter, though Q2's was a modest 0.8% fall coming in at $11.28bn. However, the annual pace has now declined to -13.0% and has been slowing since Q2 2018. Infrastructure work lifted by 0.9% to $3.076bn to be -16.1% over the year. Activity declined in the previous 3 quarters, seemingly a temporary period of weakness given there is a strong pipeline of transport and energy-related projects to be completed by state and local governments. Public building work posted a 5.1% contraction to $3.076bn, which turned the annual pace negative at -3.7% compared to 4.7% at the end of Q1.
The chart, below, aggregates the outcomes from the private and public sectors.
The state-based outcomes, inclusive of the private and public sectors, are shown in the table, below. Weakness in residential activity continues to be noticeable across the mainland states. Non-residential work was noticeably weaker in Q2, highlighted by New South Wales swinging from +10.3% to -5.6%, Victoria slowing from -0.1% to -8.9% and Queensland pulling back from -0.1% to -4.7%. Infrastructure work was mostly soft across the states in Q2, though New South Wales posted a 5.6% rise, and Western Australia saw its first quarterly increase in a year.
Construction Work Done — Q2 | Insights
This was a very weak update, highlighted by an intensification of the slowdown in the residential construction cycle, a weakening in non-residential construction work, a further easing in private infrastructure work and softness in the public sector. This creates downside risks for Q2's GDP growth outcome given the weakness from residential construction, as well as from non-residential construction and infrastructure, with more information to come to hand on these components in tomorrow's capital expenditure survey for Q2.
