Australian construction activity lifted by 1.6% in the September quarter, outperforming the 0.5% consensus figure to post its strongest outcome since Q4 2023. Headwinds to the construction sector from higher interest rates and capacity pressures remain but could be easing. Momentum in the residential segment has improved as dwelling approvals lifted to a 2-year high in Q3, while the large pipeline of public infrastructure projects continues to support engineering work.
Ongoing strength in engineering work (2.6%) and an improving residential sector (1.8%) drove construction activity to a 1.6% rise in the latest quarter. This solid result together with upward revisions that reduced the decline in output reported over the first half of 2024 from -1.9% to -0.6% paints a more upbeat picture of construction activity than going into today's report - albeit with growth heavily lopsided to the public sector (9.9%Y/Y) over the private sector (0.6%Y/Y).
Engineering work (2.6%q/q, 6.0%Y/Y) remains the growth engine of the construction sector. Infrastructure investment and the transition to renewable energy sees engineering work by the public sector running at a 13.1% pace over the past year.
Private sector residential construction activity lifted by 1.9% in Q3, its strongest rise since Q4 2022. Momentum in new home building continues to improve following an uplift in dwelling approvals to their highest quarterly total in two years in Q3. Easing capacity pressures in the sector for labour may also be playing a role.
In the non-residential segment, work done by the private sector declined by 2.5% in the quarter, more than reversing a 1.8% lift in Q2. Activity trended upwards coming out of the pandemic but now looks to be levelling out.
