Current renovation work reverses Q3 dip: Andrew Hanlan

Current renovation work reverses Q3 dip: Andrew Hanlan
Current renovation work reverses Q3 dip: Andrew Hanlan

GUEST OBSERVER

Construction work, which is trending lower, stabilised in Q4, -0.2 percent, after a surprising sharp fall in Q3, -4.4 percent.

Construction work has been trending lower over recent years as mining investment falls back to more normal levels.

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Current renovation work reverses Q3 dip: Andrew Hanlan

Within that trend, the second half of 2016 was a volatile half year.
 Q3 was particularly weak, -4.4 percent, in part due to bad weather. Q4 saw construction work stabilise at lower levels, -0.2 percent.

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Current renovation work reverses Q3 dip: Andrew Hanlan

The Q4 result was not greatly different to our expectations (Westpac f/c -0.8 percent and market median +0.5 percent).

The outcome does not alter our views on Q4 GDP, with our forecast at 0.4 percent/qtr, 1.5 percent/yr after a Q3 outcome of -0.5 percent/qtr, 1.8 percent/yr.

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Current renovation work reverses Q3 dip: Andrew Hanlan

By asset, key points are:

Private infrastructure activity fell further, -3.5 percent, with the mining investment downturn nearing its end. We had expected a sharper fall, -6 percent.
 New home building activity advanced, +0.9 percent, consistent with strength in building approvals and a sizeable work pipeline. That follows a surprise 1.9 percent fall in Q3, constrained by bad weather.

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Current renovation work reverses Q3 dip: Andrew Hanlan

Renovation work rose 2.2 percent, more than reversing a 0.3 percent dip in Q3, consistent with rising approvals and positive fundamentals.


Private commercial building rose 5.1 percent, after a sharp 10.8% fall in Q3, a decline that was overdue given earlier falls in approvals. More recently, approvals have lifted.

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Current renovation work reverses Q3 dip: Andrew Hanlan

Public works surprised to the low side, declining by 1.6 percent, whereas we had anticipated a rise of 1.6 percent. Public building work fell sharply, while public infrastructure activity consolidated in the quarter whereas a sizeable and rising work pipeline points to upside.

Andrew Hanlan is senior economist for Westpac and can be contacted here

Andrew Hanlan

Andrew Hanlan

Andrew has been with Westpac since 2002. After starting his career in the public sector, Andrew worked at the Commonwealth Treasury in Canberra, before enjoying a stint at Parliament House, where he worked as an adviser to the Finance Minister. His main focus is analysing the Australian macro economy.

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