Via Westpac on today’s construction boom:
Construction work spiked in Q2, up a staggering $4.4bn, +9.3%.
This was well in excess of expectations (mkt median and Westpac +1.0%).
In the introductory commentary and analysis for this publication, the ABS is silent on this issue.
We assume that the figure has been inflated by the importation of Prelude, a floating LNG platform. The platform set sail for WA from a South Korean shipyard on June 28.
The ABS survey reports that private infrastructure work jumped 32.2% in the quarter, +$4.0bn and that construction work in WA leapt 55.6%, $4.1bn.
We had expected the ABS to amortise the value of the platform, over the time that it was constructed. This would see a relatively smooth rise in investment and in imports.
This has been the approach in recent years and avoids these spikes – the approach taken back in the 1990s by the ABS.
Also, we are mindful that the import data, as reported in the monthly trade release, did not show a spike in June – hence our surprise today.
At this stage we are inclined to expect the ABS will revise the import data with the release of the Balance of Payments on Tuesday September 5, a day ahead of the National Accounts.
In other detail, public works continues to rise. The upswing in public investment is a notable growth engine at present as governments commit to new projects, particularly in transport.
Private new home building activity was revised from a -4.6% for Q1 to a -2.7%. The sharp -4.6% fall, as originally reported, was impacted by the disruptions due to wet weather and flooding in Qld and NSW.
On this revised higher base, such work in Q2 edged 0.8% lower.
Note that total construction work for Q1 was revised from a -0.7% to a +0.9%.
Private renovation work rose, as expected, rebounding partially from a sharp -5.7% decline in Q1.
In short, once imports are revised the monumental price of the ship which was built in Korea will be lost to GDP via net exports.
