New Zealand’s building activity accelerates strongly in Q1

The total building work put in place in New Zealand continued its strength from Q4 2015 into Q1 2016. The volume of total building work put in place rose sharply by 5.3% on a sequential basis, as compared with consensus projections of a growth of 1% and prior quarter’s 2.8% q/q growth. On a year-on-year basis, building activity grew 11% in Q1.

The first quarter growth was broad-bases as similar growth was recorded in non-residential and residential work. Residential volumes throughout the country were up 5.5% on a sequential basis. According to Statistics NZ, the trend is up 84% from its low point in September 2011. Meanwhile, non-residential volumes grew 5% after expanding 2.5% q/q in Q4 2015.

Region wise, North Island centres led the growth in nominal terms. Activity in Auckland rose sharply by 11% q/q. Other regions in North Island such as Wellington and Waikato also recorded stronger activity, growing 13% and 16% respectively. The rise in these regions counters the declines recorded in South Island. Residential activity in Canterbury declined 1.2% q/q, while non-residential activity fell 0.9%. Residential activity in Canterbury is expected to continue easing, said Westpac in a research report. Total building work activity in the remainder of South Island declined 2.1% q/q.

Currently, construction sector mainly drives the strong pace of New Zealand’s economic momentum, said ANZ in a research report. This trend is likely to continue. The only concern here is the ability of the construction sector to sustain the strong gains given the signs that resource and capacity pressures are already building, added ANZ.