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Andrew Hanlan, Research Analyst at Westpac, notes that the Australian construction work fell by 2.8% in Q3, which was a surprise result and a likely temporary dip.

Key Quotes

“Total construction activity fell by 2.8% in Q3, well below expectations (market median +0.9% and Westpac +0.6%).”

“Construction work can be volatile quarter to quarter, impacted by weather disruptions and reflecting the lumpy nature of some sizeable projects.”

“This drop in construction work will dent overall economic growth for the September quarter. Currently, we expect GDP growth of 0.7%qtr, 3.4%yr for Q3. The risks now appear to be tilted to the downside. That said, we are mindful that labour market conditions suggest the economy continued to expand at a healthy clip in the period. Jobs growth, dominated by full-time employment, was a robust 0.7% in Q3.”

“Going forward, public infrastructure investment is set to continue growing strongly, as governments commit to new projects, thereby replenishing the investment pipeline. This is likely to underpin a lift in overall construction activity – albeit at a more modest growth pace than recently given the turning down of the home building cycle.”