Australian construction activity rose at a weaker than expected pace of 0.5% in the December quarter (vs 1.0% forecast), slowing from a 2% increase in the September quarter. It is a mixed picture across the construction sector: public sector infrastructure work is expanding strongly; the residential segment is climbing out of a long-running malaise caused by capacity pressures and higher interest rates; and private sector commercial activity is weak.
Work on the expansive pipeline of public sector infrastructure projects across the nation drove construction activity to a 0.5% increase in the final quarter of 2024, up 1.8% through the year. The headline outcomes for Q4 included a 1.8% rise in engineering work (associated with infrastructure projects such as renewable energy and roads); the residential segment continuing its uptrend rising by 0.9%; and non-residential work contracting (-3.1%) for the 4th time in the past 6 quarters.
The main theme over the past year in the construction sector has been the strength in public activity. Total construction activity rose by 1.8%Y/Y with that growth driven entirely by the public sector (6.7%Y/Y). Engineering work led the way expanding by 8.6%Y/Y with modest support from building work (1.0%Y/Y). By contrast, private sector construction work was broadly flat (-0.2%Y/Y) as gains in engineering (1.2%) and residential work (5.5%) were offset by weakness in the non-residential area (-13.5%).
In the private sector, the residential segment found an uptick in momentum in 2024 putting together 4 consecutive quarterly rises, the latest being a 0.7% increase. New home building activity (0.7%q/q) was up 5.9% through the year to Q4 while alterations (0.9%q/q) advanced 3.3%Y/Y. These latest figures point to a positive contribution to quarterly GDP from dwelling investment in Q4.
Today's report, however, indicates that business investment was weak in Q4. Private non-residential construction was down 5.4% for the quarter falling by 13.5% through the year. More insights on business investment, particularly around equipment spending, will come to hand in tomorrow's capital expenditure report.
