The ABS this morning released engineering construction data for the December quarter of 2013, which revealed an increase in the value of work done, but a reduction in the construction pipeline.
According to the ABS, the total value of engineering construction in real seasonally-adjusted terms fell by 0.9% in the December quarter but rose by 0.4% over the year, with falls in private sector construction partly offset by an increase in public sector construction (see below chart).
You can see the big uplift in activity from 2003 as the commodity price boom took hold, with the key mining states of Western Australia and Queensland driving most of the increased construction activity (see next chart).
There are clouds developing on the horizon, however, with the pipeline of construction projects shrinking, albeit from highly elevated levels. After peaking at $183.5 billion in March 2012, the pipeline of construction projects – both commenced and yet to begin – has fallen to $129.6 billion as at December 2013, consistent with the view that Australian mining investment will soon unwind (see below chart).
The next chart is particularly disconcerting. It shows that mining-related engineering construction hit an all-time high in the December quarter, foreshadowing big falls in the near future:
Hence, the commonly used term “mining investment cliff”. It’s coming and it is very big, with negative impacts on both jobs and growth.
