Has the capex cliff just passed its deepest quarterly point? From UBS:
Construction work -3.7% q/q…as -9% engineering dominates 1% building gain Q2 real construction work done (private & public) was weaker than expected, for the 2nd consecutive quarter, dropping 3.7% q/q (UBS: -1.2%, mkt: -2.0%). However, Q1’s prior 2.6% q/q drop was revised to just -0.3%, such that Q2’s y/y pace was ‘in line’ with our forecast at -10.6%, albeit its weakest y/y pace in 15 years. On a GDP-weighted basis, private non-residential construction slumped a further 8.5% q/q (after -3.7%, was -7.1%), driven by a record 14.3% q/q drop in private engineering (-36.5% y/y), while private non-residential building was flat (-0.5% q/q after -4.1% & -2.7% y/y). However, private residential continues to deliver steady gains, up 2.0% (GDP-weighted), its 3rd 2%-plus q/q gain, led in Q2 by alts & ads (+5.8%, & 5.2% y/y), while new resi was flat after recent strength (+0.1% q/q, 10.2% y/y). Positively, public capex lifted further in Q2 (+5.3%, +15.4% y/y best since 2010).
By State, WA drives weakness, ex-WA construction rose in Q2 for 2nd qtr The weaker than expected Q2 result was driven by a 19% collapse in WA construction (which is now -40% y/y). Ex-WA, construction rose 1.3% q/q (+2% y/y), its 2nd consecutive gain, led by VIC (+5% & +10% y/y) & QLD (+3%, -6% y/y, improving from -21% in Q1), while NSW eased after strength (-1%, but 9% y/y).
