Construction activity stagnates into mid-year, remaining at an elevated level. Q2: +0.1%qtr, 1.2%yr.
Construction activity held broadly flat in the June quarter, edging just 0.1%qtr higher following a 2.0%qtr decline during the March quarter (revised higher from a 2.9%qtr decline). The latest result was softer than the market median for a 0.7% gain, leaving construction work up +1.2% versus June 2023.
Revisions to recent data added 1.4 percentage points to growth in construction activity over the year to March 2024 (initial estimate was 1.8%yr vs. 3.1%yr revised). We had anticipated that much of this activity would have flowed into the June quarter, given the solid increase in hours worked in the construction sector, and therefore we were expecting a bigger bounce in the latest quarter. Despite the quarterly volatility, construction work done was 1.2% higher over the 2023-24 financial year, broadly in line with our expectations.
The breakdown by construction type and sector (below) remains consistent with the broader dynamics currently at play within the sector. Of note, the construction project pipeline received a significant boost from the latest Federal and State Government budgets, particularly with respect to infrastructure funding, providing a support to current and future activity. At the same time, the sector continues to face difficulties surrounding skilled labour shortages, elevated material costs and a fierce competition for resources. This has largely presented as a slowdown in private residential construction (–3.0%yr) that has crystalised over the past year, although other segments of private works – non-residential and infrastructure – have also slowed notably over the past six months.
Construction activity in the private sector continues to move off its peak from late-2023, moderating a further –0.3% in Q2 following a –2.0% decline in Q1. Infrastructure works was the chief culprit behind the weakness in private works moving into mid-year, having fallen –0.7% in Q2 to be down –2.9% over the first half of this year. Building construction meanwhile held flat in the latest quarter, to be down –1.8% over the past six months. Within this segment, softness has been particularly evident in non-residential construction recently – down –4.8% over the past half year – while residential continues to track a slowdown that began slightly earlier in the piece.
This was mostly offset by a bounce in public sector construction activity, up +1.0% in the June quarter following an outsized –2.0% decline in the March quarter. This was driven by a +1.9% increase in infrastructure works, particularly across roads, highways and subdivisions; electricity generation, transmission and distribution; and water storage and supply. This was partly offset by a –1.8% decline in public building works, though the public sector represents a far smaller portion (10-15%) of total work done in the buildings segment.
Outcomes varied considerably across the nation, with Western Australia leading the pack with a +6.2% gain in Q2, to be up an impressive +20% versus June 2023. Gains were also recorded in Queensland (+2.3%) and Victoria (+0.5%), while declines were reported across South Australia (–0.3%) and Tasmania (–1.7%), with New South Wales posting the largest decline across the country both in the quarter (–4.3%) and over the year to June (–5.2%yr).,
https://www.westpaciq.com.au/economics/2024/08/australian-construction-work-Q2-2024
