Australian construction activity data for the June quarter is due to be published by the ABS this morning at 11:30am (AEST). A rebound in construction activity is expected after wet weather and ongoing supply constraints hampered work in the March quarter.
Construction activity declined by 0.9% in the March quarter (1.4%Y/Y) due to disruptions from wet weather on the east coast and ongoing capacity constraints amid materials and labour shortages. Covid-related absences were another headwind. The national decline was driven by a 2.7% fall in work done across New South Wales and Queensland following heaving rainfall and flooding in parts of those states.
Private sector building work contracted for the second quarter in succession, down 1.5% in Q1. Output in the residential segment was down by a further 1% in the quarter to be 2.6% lower through the year. Supply constraints have slowed progress in working through what is a very substantial residential pipeline and the adverse weather caused further delays. Activity in the non-residential segment saw a sharp 2.4% fall in the quarter due to weather-related disruptions. Engineering work was little changed rising by 0.4%q/q.
Activity in the public sector declined by 1%q/q but was still elevated over the year (8.9%) with governments bringing forward infrastructure spending to support the pandemic recovery. In the quarter, engineering work was down by 1.4% while building work ticked up by 0.3%.
Market expectations | Construction Work Done
The market looks for a 0.7% rise in June quarter construction activity, rebounding from Q1's weak outcome. There is a very wide dispersion in the range of forecasts from -2% and +3%.
The market looks for a 0.7% rise in June quarter construction activity, rebounding from Q1's weak outcome. There is a very wide dispersion in the range of forecasts from -2% and +3%.
What to watch | Construction Work Done
The focus remains on the residential sector where capacity constraints and the ending of construction subsidies have seen new home building costs rise by 20.3% over the past year. The pipeline remains substantial and is expected to add to economic growth over the coming year; however, this will require capacity constraints to ease while the rising interest rate environment may see some projects shelved.
The focus remains on the residential sector where capacity constraints and the ending of construction subsidies have seen new home building costs rise by 20.3% over the past year. The pipeline remains substantial and is expected to add to economic growth over the coming year; however, this will require capacity constraints to ease while the rising interest rate environment may see some projects shelved.
