Building activity slows in September quarter
New Zealand's building activity slowed in the September quarter as flat commercial construction offset a pick-up in residential work.
The volume of building work put in place increased a seasonally adjusted 0.7 percent in the three months ended Sept. 30, down from the 0.8 percent pace in the June quarter, Statistics New Zealand said. A 1.2 percent increase in residential activity was driven by Auckland, where consents for new builds exceeded 13,000 for the first time in October. Non-residential work was unchanged in the quarter.
"Auckland residential work picked up in the latest quarter, more than offsetting recent falls in Canterbury," acting construction statistics manager Dave Adair said in a statement. "While this quarter’s overall construction volume recorded a new high, construction activity has been around this level for two and a half years."
New Zealand's construction sector has been contending with skinnier margins as a tight labour market and more expensive building materials push up costs, something that has sent a growing number of building firms to the wall.
Today's figures show building work values rose 6.1 percent to $5.84 billion in the September quarter from a year earlier. Of that, non-residential work was up 7.9 percent at $2.06 billion and residential including alterations and additions rose 5.1 percent $3.79 billion.
Westpac Banking Corp economist Satish Ranchhod said building activity was weaker than expected as office building work was softer than anticipated. He noted that non-residential work is often lumpy and that construction levels are still elevated.
ASB Bank economist Mark Smith said the data posed a risk to ASB's forecast for a 0.6 percent increase in third-quarter GDP, and the bank will finalise that forecast once all industry data is out next week.
"Despite today’s weaker than expected result, we still expect that the NZ economy will have sufficient momentum to keep the prospects of an OCR cut on the backburner," Smith said.
Today's figures show the annual value of new residential work of $12.12 billion was 6.8 percent higher than a year earlier, while alterations and additions were 7.1 percent higher at $2.42 billion. Non-residential work totalled $7.79 billion in the 12 months through September, of which $1.47 billion was spent on office, administration and public transport, and $1.29 billion on education.