The ABS has just released data on the value of construction work done for the March quarter of 2014, which registered a seasonally-adjusted 0.3% rise in total construction activity over the March quarter and a 2.6% rise over the year. The result beat analysts’ expectations for a 0.8% fall over the quarter.
The 0.3% quarterly increase in construction activity was driven by residential construction (+6.8%), which more than offset falls in non-residential construction (-1.5%) and engineering construction (-1.6%):
Residential construction – the great hope as the mining investment boom unwinds – finally followed the recent strength in approvals, rising by 8.4% over the year, which would likely hearten the RBA (see next chart).
The pick-up in construction nationally was driven by New South Wales and Victoria, where construction rose by 5% and 4% respectively, presumably on the back of housing. By contrast, activity fell in Queensland, which may be related to the three large Gladstone LNG projects, which are nearing the final stages of construction.
Looking ahead, engineering construction is likely to fall precipitously over the next few years as large mining projects are completed. At least the pain should be dampened by a pick-up in residential activity; although given mining construction is around 50% bigger than residential, it is unlikely to be enough to fill to void left as the mining investment boom unwinds.
