Australian construction investment still declining

Australian public engineering work, rather than expanding as in the previous two quarters, is expected to post little change. In contrast, building construction by the private sector is likely to have expanded further, at a similar pace as in the previous two quarters, given strong increases in building approvals throughout 2014 and in the first quarter of this year. 

The engineering construction is expected to continue to decline, but the slump of 7.3% in Q1 is likely to have been exceptional, especially the 9.8% drop in private engineering, states Societe Generale. Still, given ongoing sharp reductions in mining construction spending, another decline is likely in the order of 6%. 

"The public sector building work, in contrast to the previous five quarters when it fell at a rapid clip, is expected to show little change from the Q1 level. As a result, the volume of building construction is likely to exceed that of total engineering work for the first time since Q4 10. Overall, this first partial reading for Q2 GDP is likely to indicate less drag from construction on GDP growth than in Q1", said Societe Generale in a report on Monday.