Mining wind back slows construction
A slowdown in the mining investment boom contributed to construction activity marking time in the final months of 2012. Total construction work done in Australia fell 0.1 per cent in the December quarter, Australian Bureau of Statistics (ABS) figures on Wednesday show.
St George economist Janu Chan said the slight decline was due to a 1.3 per cent fall in engineering construction, which includes mines, roads and bridges.
She said a sharp drop in commodity prices in the second half of last calendar year would have contributed to the decline.
Ms Chan said the slide came after a period of strong growth in engineering construction, which was up 19.5 per cent in the year to December.
"I guess it's providing evidence it is softening and it does relate to weaker commodity prices coming off," she said.
"There is still quite a lot of (engineering) work in the pipeline but that growth is easing off."
Commonwealth Bank senior economist Michael Workman said he expects construction work to peak in the last three months of 2013.
"The accumulated effects from the Western Australian and Queensland LNG (liquefied natural gas) projects are still heading for a peak in construction activity later this calendar year, in our view," he said.
"The pipeline of engineering work to be done is exceptionally high but has tapered off from its peak.
"It suggests that the investment phase of the mining boom still has some way to run."
Mr Workman said there would be a clearer picture on the outlook for mining investment when the December quarter capital expenditure figures were released on Thursday.
The capital expenditure data and Wednesday's construction figures feed into the December quarter gross domestic product (GDP) data to be released next week.
"Although today's headline numbers were weaker than market expectations, the implication for GDP is slightly to the downside," Mr Workman said.
"A recovery in residential construction is, in our view, an essential requirement if GDP growth is to reach three per cent per annum through 2013."
The ABS reported that total building work done in the December quarter, including homes and non-residential buildings such as offices and shops, rose 1.8 per cent from the September quarter.
Housing Industry Association economist Shane Garrett said the figures showed a tentative recovery.
"It is encouraging that the actual volume of residential building work has increased for the second successive quarter following more than a year of declines," he said.
"The fact that the pace of increase picked up supports the view that some momentum may be gathering in the sector."
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