Construction activity declined for a 5th consecutive quarter: Andrew Hanlan

EXPERT OBSERVATION

The construction sector is in a cyclical downturn led by the housing sector, where conditions have swung from boom-to-bust.

Private new home building work fell by a further 3.4%, meeting our expectations, to be 11.6% below the peak of mid-2018. Renovations were broadly flat, -0.2%. The housing downturn still has further to go and will weigh on conditions into 2020.

Public works returned to adding to growth, increasing by 5.4% in the quarter. That follows a moderation over the past year (down 13.4%) reflecting a gap in the investment project pipeline. Our view has been and remains that public investment will be supportive of growth over the near-term, with governments continuing to commit to additional projects.

Private infrastructure provided a downside surprise, declining by 4.6%. The outlook is for some improvement. Commencements have picked-up somewhat (eg some iron ore projects have proceeded in response to the recent elevated prices) and the work pipeline has increased – pointing to an emerging lift in activity during the year ahead.

ANDREW HANLAN is a senior economist for Westpac