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Andrew Hanlan, Research Analyst at Westpac, notes that Australia’s construction work increased by a small 0.2% in the March quarter as the headline result fell short of expectations (market median 1.3% and Westpac 0.7%).

Key Quotes

“Despite an underwhelming headline, the construction sector will potentially add about 0.2ppts to activity in Q1. Notably, the survey underweights renovation activity relative to the national accounts. Adjusting for this, construction work is up by a little over 1% in the period, broadly consistent with our forecast.”

“Public construction is a growth driver, up a further 2.7% in the quarter (in line with our forecast of +3%), led by infrastructure with a focus on transport projects. There is considerable further upside to public investment.”

“Private engineering work was broadly stable, +0.4%, reflecting a greatly diminished drag from the mining investment wind-down, as well as a lift in non-mining activity.”

“New home building activity consolidated in Q1, -0.1%, after declining through 2017. This is consistent with an expected near-term consolidation given the recent resilience in approvals. Beyond that, we expect the downturn in home building activity to accelerate in 2019 reflecting an anticipated pull-back in approvals from current highs.”