Building construction up, engineering down

Data released by the Australian Bureau of Statistics (ABS) showed the value of residential and non-residential construction completed in Australia rose to $26 billion, a 1.2 per cent increase compared with the previous quarter. This was also 6.1 per cent higher than the second quarter in 2015.

Residential building reached $17 billion for the second quarter of 2016 – a 0.8 per cent increase compared with the previous quarter and a 9.4 per cent rise year-on-year.

Non-residential work contributed $9 billion – a 2.1 per cent increase from the first quarter of 2016 and a 0.4 per cent rise compared with the second quarter in 2015.

According to the study, building construction was underpinned by booming housing markets in Victoria and New South Wales, where construction had increased for the past eight and seven quarters, respectively.

The ABS report showed other states were lagging behind, however, with construction work falling for the past 10 consecutive quarters in Queensland and the past six quarters in the Northern Territory. Levels had decreased in Western Australia and Tasmania over the past year while South Australia had recorded a drop over the past six months.

The growth in the residential and non-residential sector was not enough to offset the effects of engineering construction. Activity in this sector fell 9 per cent compared with the first quarter of 2016 and 24.9 per cent compared with the previous year to $21.5 billion.

Overall construction levels were down 3.7 per cent for the quarter and 10.6 per cent year-on-year to $47.4 billion.

The report stated the decline in the value of engineering was likely caused by a number of major engineering and mining projects, including liquefied natural gas works, beginning to taper.

AiG report

The ABS findings corresponded with the latest Australian Performance of Construction Index (PCI), compiled by the Australian Industry Group (Ai Group) and the Housing Industry Association (HIA).

The PCI, which measures changes in activity levels across the construction sector each month, was 51.6 for July. A reading above 50 points indicates that construction activity is expanding, with the distance from 50 indicating the strength of the increase.

July marked the second consecutive month of overall expansion although at a slower rate as the PCI fell 1.6 points from June.

Ai Group head of policy Peter Burn said the construction sector was continuing to shift emphasis away from mining-related projects to the residential sub-sectors.

"The construction sector grew again in July despite drags from the engineering construction and apartment sub-sectors.

“The overall growth came on the back of further expansion in house building and a modest uplift in commercial construction.”

Across the sub-sectors, activity in apartment building and engineering declined in July; however, housing and commercial construction continued to expand.

"Apartment building is falling back from record levels while detached house building is a bit stronger,” HIA senior economist Shane Garrett commented.

“We expect that the share of new home building accounted for by apartments will decline to more long-term levels over the next few years.”

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