Analysts at ANZ note that the New Zealand economy’s volume of building work put in place increased 0.7% q/q in Q3 to be up 1.7% over the year and the modest rise was well below ANZ’s (and market) expectation for a 2.5% rise and suggests challenges in the construction industry could be more acute than assumed.
Key Quotes
“These data are volatile and payback is a possibility. Nominal activity increased 1.8% q/q to be up 6.1% y/y.”
“Softer-than-expected non-residential work (0.0% q/q) was the main culprit for weakness in total volumes, and these data are definitely the lumpier of the two main breakdowns. The other component, residential work, came in close to our expectation, rising 1.2% q/q. But this hardly represents a significant acceleration, with annual growth remaining modest at just 0.8%.”
“Overall, the main signal we’ve been getting out of the data of late is that building work is holding steady at a high level, but risks of a slowdown remain.”
“Today’s figures present modest downside risk to our provisional Q3 GDP estimate of 0.6% q/q and tentatively reaffirm our expectation that headwinds in the economy will see GDP growth soften slightly into year end, with growth struggling to push through 2 ½ -3% y/y over 2019-20.”
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