September quarter activity data for Australia's construction sector is due to be released by the ABS this morning (11:30am AEDT). A solid rebound in work done is expected after a weather-disrupted Q2; however, capacity constraints in the sector remain a headwind.
Construction work done slumped by 3.8% in the June quarter as activity was hampered by wet weather and ongoing shortages of materials and labour. All states recorded a contraction in activity in Q2. Building work (including the residential and non-residential segments) fell by 4.6% and engineering activity declined by 2.7%.
Private sector construction activity was down by 4.5% in Q2, its fourth quarterly fall in succession. Residential work contracted by almost 7% as shortages of labour and materials and well above average rainfall associated with an extended La Niña event in Australia held back new home building (-7.7%) and weighed on alterations (-1.9%). Momentum in non-residential activity stalled over the first half of the year and was broadly flat in Q2 (-0.2%). Engineering activity fell by 4.1% to be down by 10.2% through the year.
In the public sector, construction activity posted a 1.7%q/q fall as weakness came through in both building (-3.3%) and engineering work (-1.0%). The volume of work underway remains at elevated levels due to state governments boosting infrastructure spending coming out of the pandemic.
Market expectations | Construction Work Done
The market anticipates a rebound in construction activity of 2.0% following Q2's 3.8% fall. The range of individual forecasts in the Bloomberg survey is very wide from -1.8% on the low side to 5.0% on the top side.
The market anticipates a rebound in construction activity of 2.0% following Q2's 3.8% fall. The range of individual forecasts in the Bloomberg survey is very wide from -1.8% on the low side to 5.0% on the top side.
What to watch | Construction Work Done
Australia's residential construction pipeline remains substantial with a record number of homes under construction. This has been stretching the capacity of the sector for some time resulting in new home building costs rising very sharply, which has contributed significantly to higher inflation in Australia. Signs that activity in the segment is picking up will suggest that some of these strains are at least starting to ease.
Australia's residential construction pipeline remains substantial with a record number of homes under construction. This has been stretching the capacity of the sector for some time resulting in new home building costs rising very sharply, which has contributed significantly to higher inflation in Australia. Signs that activity in the segment is picking up will suggest that some of these strains are at least starting to ease.
