Analysts at ANZ noted that NZ residential consents fell 10.4% m/m in July.
Key Quotes:
“Consent issuance has been volatile of late. But in trend terms, growth has been softening and this is a considerable drop, consistent with reports that the pipeline is waning.
Activity remains elevated but construction firms are facing difficulties and further softening in the pipeline is a risk, especially on the non-residential side, given recent weakening in investment intentions. ”
KEY POINTS
Dwelling consent issuance plunged in July. Residential consents fell 10.4% m/m, following an 8.2% drop in June. The dip was seen across both apartments and houses. Consents for houses tend to be less volatile and fell 6% m/m in July after a 3.9% dip last month. Multi-dwelling consents were down 17.8% m/m, after falling 14.7% in June.”
Building work remains at a high level. Consented floor area – which aligns more closely to building work – dipped 3.5% m/m in July, after falling 16.0% in June. However, this follows a 20% increase in May. Nonetheless, the trend is pointing down. In trend terms growth in residential consents has been waning (from increasing 3.3% m/m in February to falling 2.1% per month currently) and today’s data represent a meaningful drop.”
On the non-residential side, consents also fell, with $484m in consents issued – a monthly fall of 13%, although these consents can be volatile.”
“The cost of consented work per square metre continues to increase at a slower pace – up 2.1% y/y (3mma) down from 10% in March. Firm pessimism may be leading to wariness in passing through cost increases, despite an evident profit squeeze.”
“Today’s data are consistent with reports that the construction pipeline is waning. Month to month moves can be volatile but the outlook is looking less assured and there may be some bumps in the road ahead, especially given business pessimism and moderating investment intentions. This is made more challenging by the fact that the construction industry is grappling with capacity constraints, low productivity, and financing strains from profit squeeze and reduced credit availability.”
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