Australian construction activity data for the March quarter is due to be released by the ABS today at 11:30am (AEST). Construction work is expected to turn higher in Q1, led by a robust residential sector on the back of policy stimulus and rising house prices, though non-residential work is still weighed by uncertainty stemming from the pandemic. Meanwhile, with state governments bringing forward projects there is a lengthy pipeline of work coming from the public sector.
As it stands | Construction Work DoneThe construction sector has been relatively less affected by the pandemic than many other areas of the economy more exposed to activity restrictions. Still, construction activity had declined by 1.8% in the September quarter and this was followed by a further 0.9% contraction in the December quarter, leaving its level 1.4% lower than a year earlier (full review here).
Private sector activity was coming off a 2.9% fall in Q3, in part due to Victoria's return to lockdown, but was unable to rebound with activity stalling in the December quarter (-1.1%Y/Y). The residential sector (2.7%q/q) was starting to pick up on the back of policy stimulus and rising house prices, though this was offset by weakness in non-residential (-2.9%q/q) and engineering work (-1.6%q/q).
Despite a lengthy pipeline of projects, public sector activity surprised with a 3.6% contraction in Q4 (-2.2%Y/Y) with declines in engineering (-4.6%q/q) and building work (-1.1%).
Market expectations | Construction Work Done
Construction activity is forecast to have advanced by 2.1% in the quarter on the median estimate, while the range of estimates is between 1.0% on the low side to 5.0% on the high side.
Construction activity is forecast to have advanced by 2.1% in the quarter on the median estimate, while the range of estimates is between 1.0% on the low side to 5.0% on the high side.
What to watch | Construction Work Done
Generally, this is quite a low-key release but with the construction cycle turning higher it may attract more interest from the market and the risks do seem to be weighted towards the upside. Policy stimulus and closed borders have helped turn around conditions in the housing market with strong activity from upgraders while government incentives are helping the first home buyer segment. The Federal Government's HomeBuilder program will add significantly to the supply side with detached dwelling approvals rising to record highs, while approvals for alteration work for established houses have also surged in response to the scheme and these are the areas of most interest in today's report. Meanwhile, activity in the non-residential space is likely to have remained weak with business investment slower to recover than other areas of the economy, though public works could rebound after a weak Q4 with state governments bringing forward projects to support demand.
Generally, this is quite a low-key release but with the construction cycle turning higher it may attract more interest from the market and the risks do seem to be weighted towards the upside. Policy stimulus and closed borders have helped turn around conditions in the housing market with strong activity from upgraders while government incentives are helping the first home buyer segment. The Federal Government's HomeBuilder program will add significantly to the supply side with detached dwelling approvals rising to record highs, while approvals for alteration work for established houses have also surged in response to the scheme and these are the areas of most interest in today's report. Meanwhile, activity in the non-residential space is likely to have remained weak with business investment slower to recover than other areas of the economy, though public works could rebound after a weak Q4 with state governments bringing forward projects to support demand.
