Construction peaking in NZ and picks up in Australia - AmpGFX

Construction activity has been a strong driver of the NZ economy since the 2011 Canterbury earthquake, but is showing signs of peaking, according to Greg Gibbs, Analyst at Amplifying Global FX Capital. 

Key Quotes

“Building consents appear to have peaked in 2016.”

“The construction components of the ANZ business survey fell sharply in July.  Some of this fall is a seasonal winter lull, but they were the lowest since 2015.”

“It may be related to RBNZ macro-prudential measures, but the housing market has slowed significantly this year.  House sales are down 25%y/y and house price growth has slowed to around 6%y/y, down from 13.5%y/y in January.”

“Non-residential construction in Australia picks-up

However, in Australia construction activity may be picking up, supported by rising non-residential activity.  The value of non-residential building approvals in Australia is up 27% 3mth-yoy in June, while in New Zealand it is down 9% 3mth-yoy in June.

The Australian residential building sector may have peaked in 2015/2016, as apartment approvals have fallen from their peak in July.  However, the most recent approval trend has picked up in the last month, due to stronger house approvals.

The Australian Industry Group PMI for the construction sector also appears more buoyant, at 54.9 3mma in June, a high since October 2014 (a July figure is due on 7 Aug).  This contrasts with the weaker construction components in the ANZ New Zealand business survey.

The RBA Governor’s speech last week, and the RBA policy statement this week suggest that the RBA sees slowing in the Australian housing market.  However, the most recent monthly data for July showed a 1.5%m/m rise in the CoreLogic median city house price index in July, up 10.4%y/y, re-accelerating from a dip to 8.3%y/y in May.”