Housing sector signs of life, but total construction work fell 0.1% in December: ABS
Total construction work in Australia fell 0.1% in December, according to Australian Bureau of Statistics figures released yesterday, defying economists' more optimistic expectations.
It had been previously predicted construction jobs would rise by 1.5% for the quarter, but the results suggest the construction industries woes are not yet over.
The latest Australian Securities and Investment Commission statistics indicated the construction industry had the highest number of insolvencies in 2012, making up over a fifth of the total 10,632 companies.
Savanth Sebastian, market analyst at CommSec noted while construction work eased in the December quarter, work done was still up 11.9% on a year ago and just holding shy of the record highs reached in the September quarter.
"In addition September quarter construction was revised up from 1.7% to 1.9%," he said.
Commercial building work done rose by 2% in the December quarter with residential work up 1.7% while engineering work fell by 1.3%.
South Australia (down 9%) and Western Australia (down 7.5%) lead the declines.
"The modest decline in construction activity is hardly anything to be concerned about," Savanth Sebastain said.
"The weakness in the latest result was largely driven by the pullback in engineering activity driven by the mining services sector late last year and confined to Western Australia and South Australia.
"Given the subsequent improvement in Chinese activity and rebound in commodity prices some of the weaknesss in engineering activity would be reversed in coming months.
"Residential building work rose for the second straight quarter and while it is starting off a low base the improvements are certainly encouraging.
"The housing sector is showing signs of life given the low interest rate environment and the fundamentals remain sound for a healthy pickup in residential construction.
"Low interest rates, pent up housing demand, strong population growth, and low unemployment coupled with state and federal govenement grants should ensure that residential construction coninues to improve over the coming year," he said adding the Reserve Bank would be encouraged by the pickup in residential activity.
