Australian construction activity rebounded in the September quarter and inflationary pressures in the sector softened slightly. Better weather and some improvement in supply constraints for materials and labour look to have driven today's result.
Construction Work Done — Q3 | By the numbers
- Construction work done lifted by 2.2% in the September quarter, broadly in line with expectations and rebounding from a 2.0% fall in Q2 (revised from a larger 3.8% decline reported initially). Activity through the year swung from -2.6% to 1.1%.
- Category details were;
- Engineering work lifted 3.4%q/q (from -0.2% in Q2) to 4.9%Y/Y
- Building work rebounded by 1.2% (following a 3.3% fall) to -1.7%Y/Y
- Residential work expanded by 1.3% (from -5.7%) to -5.2%Y/Y
- Non-residential work advanced by 1.1% (from 0.3%) to 3.9%Y/Y
Construction Work Done — Q3 | The details
Construction activity rose by 2.2% in the September quarter, reversing the decline in output seen over the first half of the year. Activity has been hampered by an extended La Niña event leading to well above average rainfall, and by shortages of materials and labour. An easing in those headwinds supported a rebound in activity for Q3, with engineering output advancing by 3.4% and building work up by 1.2%. The latter included rises in the residential (1.3%) and non-residential segments (1.1%).
Driving the rise in construction activity was work done by the private sector on infrastructure (4.2%), reflecting the substantial pipeline of projects being rolled out by governments in Australia.
Private sector residential construction work lifted by 1.3% in the quarter but has declined by almost 6% over the year; wet weather and capacity constraints have held back progress in working through a pipeline that has expanded to a record number of more than 100k homes under construction following the stimulus measures to support the sector through the pandemic. New home building lifted by 2.5% in the quarter, but alterations fell by 5%. The disparity is likely reflecting the unwind in renovations from their pandemic-driven surge as more of those projects have been completed.
Work in the non-residential space returned to pre-pandemic levels on the back of a 2.8% rise in Q3. Momentum in this segment has appeared to be more resilient to the headwinds that the residential segment has run up against.
Public sector construction activity expanded by 0.9% in the quarter, a much weaker outcome than in the private sector (2.6%). Work on public infrastructure (2.4%) picked up after a lacklustre first half of the year; however, that was attenuated by a fall in public building (2.8%).
Construction Work Done — Q3 | Insights
The details in today's report are supportive for Q3 GDP in terms of the contribution to growth from residential construction following recent weakness. A second highlight is that quarterly inflation in the sector slowed for the first time in 2 years, down to 2.8% in the quarter from 3.2%, but the pace remains very elevated.
