Australia construction activity weakens in Q3, likely to weigh on GDP numbers

Australia’s construction activity weakened during the third quarter of this year and is expected to be a drag on the country’s gross domestic product (GDP), according to the latest report from ANZ Research.

Construction in Australia fell 2.8 percent in Q3, more than offsetting the solid rise in Q2. The decline was across the board, with each of the housing, non-residential building and engineering construction sectors posting falls.

Housing investment was down as expected, shedding 1 percent from its previous record level. It is believed that the decline in building approvals through 2018 will leave a significant gap in activity once the current round of projects are complete, the report added.

The largest driver of the decline in overall construction was privately funded engineering construction (-7.5 percent q/q). The biggest fall in total engineering was in the Northern Territory (-40 percent); this is expected to largely reflect the ongoing drop-off in mining investment as the Ichthys project nears completion.

On the other hand, publicly funded engineering construction was the best performer in Q3. While activity was technically down a fraction (-0.1 percent), it remains around a record level. Total engineering construction continued to rise in New South Wales and Victoria, consistent with the large pipeline of road and rail works currently under construction.