Output in the Australian construction sector declined in the March quarter as severe wet weather on the east coast and the surge of Omicron cases added to the existing delays being caused by capacity constraints.
Construction Work Done — Q1 | By the numbers
- Construction work done fell by 0.9% in Q1 to $53.7bn, well down on expectations for a 1% rise. Activity slowed to a 1.4% increase through the year from 3.8%. Meanwhile, the contraction in activity previously reported in Q4 (-0.4%) was revised to a 0.6% rise.
- Across the categories;
- Engineering work -0.4%q/q to $23.6bn (4.8%Y/Y)
- Building work -1.3%q/q to $30.1bn (-1.1%Y/Y), which includes;
- Residential work -0.9% to $18.3bn (-2.4%Y/Y)
- Non-residential work -1.8%q/q to $11.8bn (1%Y/Y)
Construction Work Done — Q1 | The details
Capacity constraints caused by materials and labour shortages and disruptions from wet weather and Omicron led to a 0.9% fall in construction activity in the first quarter. Progress in working through the expansive pipelines that have built up over the Covid period in the residential and infrastructure segments is being delayed.
Although temporary, severe wet weather and flooding set progress back further as construction activity contracted by 2.7% across New South Wales and Queensland in Q1.
Construction work in the private sector contracted for a third quarter running, falling by 0.9% in Q1. Residential construction work continued to slow (-1%q/q), with activity in the segment sliding back to where it was at the end of 2020. New home building (-1.6%q/q) continued to be hit by delays from materials and trade shortages. However, in better news, despite these headwinds, the sector has been able to support a significantly higher level of alteration work (2.1%q/q) than was seen prior to the pandemic. This surge was driven by the HomeBuilder grants scheme.
Private non-residential (commercial) construction was on an upturn but has lost some momentum over the past couple of quarters. Q1's 2.4% fall looks to have been driven by the wet weather in NSW.
Engineering work in the private sector has held around a stable level over recent years, reflecting the subdued level of investment in the mining sector over this period.
Public sector work was down 1% overall in the quarter, with building work broadly flat (0.4%) and engineering work turning lower (-1.4%). The latter is up substantially through the year (15.1%) with state governments bringing forward projects to support their local post-Covid recoveries.
Construction Work Done — Q1 | Insights
A weak update from the construction sector that indicates new home building and commercial construction will weigh on first quarter GDP. Policy stimulus measures, including construction subsidies, have brought forward a significant volume of work, but supply constraints are limiting the ability of the sector to work through it. Surging materials and labour costs may see some projects previously approved being deferred. There were further delays to construction work from wet weather and Omicron in the quarter.
