The December quarter update of Australian construction work done is due to be released this morning by the ABS at 11:30am (AEDT). A strong upswing in the construction cycle was paused in Q3 amid state lockdowns during the Delta wave and from capacity constraints. Eased restrictions should see a Q4 rebound in activity across the sector.
Construction activity held up better than expected during a disrupted Q3 with the Delta lockdowns in place in New South Wales, Victoria and the ACT. In the quarter, construction activity declined by 0.3% against a 3% fall expected.
Public sector activity contracted by 2.7% in the quarter compared to a 0.5% rise in the private sector. Site restrictions hit public building work (-9.7%), driving a 2.2% fall in total non-residential work. This weakness was centred in New South Wales where the temporary shutdown of the construction sector saw non-residential work plunge by 11.3%.
Private sector residential construction activity stalled over Q2 (0%) and Q3 (0.1%) amid capacity constraints and lockdown disruptions. In Q3, a 0.8% decline in new home building was offset by a 6% rise in alteration work, with the latter benefitting from the pandemic-related shift for the desire for more space and from the HomeBuilder grants program.
There is a large volume of government infrastructure projects in the pipeline, but as highlighted above public sector work fell in Q3 (-2.7%). Engineering activity lifted slightly (0.5%) but could not offset the lockdown-related fall in building work (-9.7%).
Market expectations | Construction Work Done
The easing of lockdowns is expected to drive a rebound in activity, with construction work done forecast to rise by 2.1% on the quarter (range: 1% to 3%). The headwinds to that forecast are from labour and materials shortages holding back progress.
The easing of lockdowns is expected to drive a rebound in activity, with construction work done forecast to rise by 2.1% on the quarter (range: 1% to 3%). The headwinds to that forecast are from labour and materials shortages holding back progress.
What to watch | Construction Work Done
Today's report should confirm the resumption of the upswing from the first half of 2021 where there was broad-based momentum in construction activity. In particular, watch activity in the residential segment where there is a very large pipeline of work to be done on the back of the Covid stimulus response.
Today's report should confirm the resumption of the upswing from the first half of 2021 where there was broad-based momentum in construction activity. In particular, watch activity in the residential segment where there is a very large pipeline of work to be done on the back of the Covid stimulus response.
