Australia’s headline construction rises below expectations in Q1

Australia’s headline construction figure for the first quarter came in below expectations; however, the details of the report were strong. Construction rose 0.2 percent sequentially in the March quarter, with a mix of results throughout construction types and the private and public sectors. The public sector led the way with growth of 2.7 percent sequentially, while private activity dropped 0.5 percent sequentially. Housing and engineering construction saw small rises, but the overall result was dragged down by softness in the non-residential building segment.

Public sector activity continued with its solid growth path, and rose 15 percent year-on-year. The main driver of this rise in first quarter was the engineering sector. This comes as no surprise given the huge backlog of work remaining throughout the publicly-backed infrastructure projects, particularly in the road and rail segments. This is especially true in Victoria, where total engineering construction rose 14 percent sequentially and is up 40 percent from last year’s level.

Meanwhile, housing construction saw a small rise of 0.4 percent sequentially, underpinned by a sharp recovery in alterations and additions. But non-residential building dropped 4.2 percent sequentially. Admittedly, this comes after a strong run of growth in the previous year. However, with commencements of new work down 20 percent in the fourth quarter, and approvals dropping sharply at the beginning of 2018, this is one area that would be closely monitored for further signs of softness, noted ANZ in a research report.

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