A modest decline in Australian construction sector activity in the September quarter (-0.7%) belied the sharpest increase in building work (4%) in a decade. The engineering category (-5.8%) weighed on the headline figure, relating to a pullback from an earlier surge in the Northern Territory associated with resources sector projects.
Construction sector activity was down 0.7% overall for the September quarter - a weaker than expected outcome (0.3%) - following a 2.9% rise in the June quarter (revised from 3%). The result in the latest quarter slowed annual growth in output to 2.9%, down from 4.5% previously.
The key movements in the quarter were: engineering -5.8% (its largest decline in 7 years); building work 4% (strongest rise since Q1 2015), which includes residential sector work 4.2% (fastest since Q4 2020) and non-residential work 3.7% (sharpest lift in 7 quarters).
Also demanding attention is the composition of growth between the private and public sector. Output by the public sector has slowed over the past year (-1.8%) as major projects have reached or neared completion, but activity lifted in the latest quarter by 2.7%, driven by engineering work (3.9%). Private sector work fell for the first time in 4 quarters (-2%) but had still risen solidly over the past year (4.8%) - standing in contrast to the public sector.
Within the private sector, residential work posted a 4% increase in the quarter (7.9%Y/Y) - its sharpest rise in almost 5 years. A 4.4% rise in new home building (detached houses 5.8% and units 2.2%) was its fastest expansion in a single quarter since Q1 2015, while alterations also lifted by 1.4%.
Activity in the non-residential segment done by the private sector rose 6.6%, outpacing in a single quarter its growth over the past four (5.5%). Investment in data centres is likely playing a role in this expansion.
Meanwhile, private engineering activity saw a dramatic retracement (-13%), after accelerating in the June quarter (13.2%). Those sharp movements were driven by the accounting practices of the ABS associated with mining equipment in projects in the Northern Territory.
