By Andrew Nelson<\/p>\n
Construction work was much stronger than anticipated, increasing by 4.4% in the September quarter versus market expectations for an increase of 1.5%. The latest read also saw the June quarter revised up, with the previous decline of 2.6% improved to a slide of just 0.4%.<\/p>\n
Construction activity accounts for about 15% of the Australian economy and this latest read will add up to 0.5% to GDP growth rather than adding the 0.1% Westpac and TD Securities were anticipating. However, economists at Westpac see the result more in terms of offsetting potential downside risks than providing new upside impetus.<\/p>\n
There is a lot more partial Q3 data to come, including tomorrow’s capex and next Monday’s business indicators that should provide valuable income and inventories data. Potential downside risks include the volatile public and inventory numbers, while an improving farm sector is a possible source of upside.<\/p>\n
Looking at the numbers, Westpac notes that dwelling renovation, which was actually lower, has a weight five times larger in the national accounts. This means the headline construction work done figure overstates the strength a little.<\/p>\n
In breaking down the result, one of the big surprises was a 10.4% jump in infrastructure construction activity. Although, the high figure may be somewhat anomalous given the lumpy nature of infrastructure construction spending because of the greater dominance of sizeable projects.<\/p>\n
Another possible factor in the jump in infrastructure construction activity, note the Westpac economists, was a big boom in Western Australia. This was partially aided by the push to rectify the disruption from the Varanus Island gas explosion late in the June quarter.<\/p>\n
TD Securities Senior Strategist Joshua Williamson says of specific importance to GDP growth were the private dwellings and non-dwelling construction components. He notes both of these were higher than expected and should provide a small positive bias to his flat quarterly GDP forecast.<\/p>\n
Residential activity surprised to the upside on an overall rise of 0.9% versus an expected a modest decline. Westpac reports that new residential building rose 1.3%, despite weakness of approvals, while renovation work declined by 1.4%.<\/p>\n
Non-residential building fell by 2.4% in total, with private work falling by 2.0% and possibly reflects the impact of the credit crunch. Westpac expects further weakness ahead for this segment, although a rise in public works could provide some partial offset.<\/p>\n
All in all, the result could shave a few points from RBA rate cut expectations in December, but Williamson thinks the market will not be keen to accept a break in the easing bias without further evidence from tomorrow’s capex data and the other partials that go into the GDP mix.<\/p>\n","protected":false},"excerpt":{"rendered":"
Q3 construction work in Australia was much stronger than expected, painting a more positive picture of GDP growth for the September quarter.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/54950"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=54950"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/54950\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=54950"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=54950"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=54950"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}