Australia's construction activity report for the March quarter is due to be released by the ABS this morning (11:30 AEST). Construction activity picked up over the back half of last year as supply constraints eased and weather-related disruptions cleared. The sector continues to face headwinds, but activity is expected to have advanced in the first quarter of 2023.
It was a year of two halves in 2022 for construction activity. Wet weather and supply constraints hampered activity in the first half (-2.2%) before an easing of these headwinds cleared the way for a second half rebound (3.3%). In the most recent quarter, however, construction activity surprised with a modest 0.4% fall.
Private sector construction work expanded by 2.8% overall in the second half but declined by 1.5% in the December quarter. Weakness in the non-residential segment (-7.5%) drove the quarterly fall. Residential work lifted by 0.9% in Q4 with new home building gathering momentum (2%) as renovations continued to unwind from their pandemic highs (-5.1%). Engineering work was a headwind, reported to have contracted 0.8% in Q4.
Work done in the public sector advanced by 2.6% in the December quarter and by 4.7% in the second half of the year. Governments across Australia are working through an expansive pipeline of infrastructure projects, driving a 3.5% lift in engineering work into year-end. Public building also increased by 0.3% in Q4 to be up by 4.8% through the year.
Market expectations | Construction Work Done
A 0.7% rise in construction activity is expected in the March quarter; this is around a wide range of estimates from -1.5% on the low side to 2% on the high end.
A 0.7% rise in construction activity is expected in the March quarter; this is around a wide range of estimates from -1.5% on the low side to 2% on the high end.
What to watch | Construction Work Done
The focus largely remains on residential construction. Record numbers of homes are under construction in Australia following the stimulus measures and the uplift seen in housing prices during the pandemic. Supply constraints in the availability of materials and labour have been major headwinds to working through the housing pipeline. More recently, insolvencies in the sector have picked up as a result of the cost increases builders have faced over an extended period. Meanwhile, building approvals have fallen to decade lows reflecting rising interest rates and the associated falls in housing prices.
The focus largely remains on residential construction. Record numbers of homes are under construction in Australia following the stimulus measures and the uplift seen in housing prices during the pandemic. Supply constraints in the availability of materials and labour have been major headwinds to working through the housing pipeline. More recently, insolvencies in the sector have picked up as a result of the cost increases builders have faced over an extended period. Meanwhile, building approvals have fallen to decade lows reflecting rising interest rates and the associated falls in housing prices.
