Australian construction activity contracted by 2.1% in the June quarter, a weaker-than-expected result (0.5%). However, the weakness related to volatility in the engineering segment (-6%), which unwound after a March quarter spike. The data centre build out continued to drive growth in non-residential construction, while the residential sector remained on the rise.
Construction work done fell by 2.1% in the June quarter, its weakest outturn since the September quarter of 2020, downshifting annual growth to 2.7% from 7.3%. However, as alluded to above, the result was heavily impacted by a 6% decline in engineering work (-5.1%Y/Y), reversing after a 7.4% surge in the March quarter that related to the installation of equipment for a large-scale energy project.
Building work rose 1.3% overall in the latest quarter - its 9th consecutive rise - to be up 10% through the year. That includes both the private and public sectors, which saw a significant divergence this quarter. Private sector building work lifted by 2% whereas public sector building work was down 3.9%.
This latest gain in private sector building lifted annual growth to almost 12%. This has been supported by non-residential building (2.3%q/q, 18.4%Y/Y) due largely to the data centre build out and investment in renewable energy. Meanwhile, residential building (1.8%q/q, 9.1%Y/Y) has also accelerated helped by the RBA's rate cuts last year. Private engineering activity was down 8.7%q/q after lifting by 16.6% in the prior quarter.
In the public sector, total activity declined by 2.5% on falls across engineering (-2.1%) and building work (-3.9%). Over the past year, public work has contracted by 3.4%, reflecting the earlier completion of major government projects.
There were clear signs in today's report of renewed inflationary pressures in the sector. The construction implicit price deflator rose 1.8% in the June quarter, its sharpest rise since the December quarter of 2022, lifting to a 4% year-on-year pace.
