NZ: Building work put in place back at highs - ANZ

New Zealand’s total building work volumes rose in Q4, although at a more modest pace than in Q3, while the trend remains fairly flat, notes Phil Borkin, Senior Economist at ANZ.

Key Quotes

“Based on recent consent issuance figures, residential building work could soften over the first half of 2018, which we see as indicative of the capacity pressures facing the sector. Today’s figures (as well as the separate Wholesale Trade survey) were close to our expectations, so there are few implications for our current provisional estimate for Q4 GDP growth of 0.7% q/q (3.1% y/y).”

“Key Points

• The volume of total building work put in place rose 1.4% q/q in Q4, which was close to consensus (and our) expectations. That follows a 2.8% q/q lift in Q3 and sees the level of activity surpass the recent high achieved in Q4 2017 – just.
• The lift in Q4 was driven entirely by a lift in non-residential building work, which rose 4.1% q/q. Residential volumes dipped 0.4% q/q after recording a solid 4.1% q/q lift in Q3 and looks set to soften further in coming months given the recent trend in dwelling consents.
• In nominal terms, total activity rose 2.3% q/q, but it was a mixed picture across the country. For the first time since Q2 2016, total Canterbury building work rose (+6.5% q/q), driven by a large jump in non-residential activity. Auckland building work took a breather (+0.4% q/q), with offsetting moves in residential and non-residential building work. Strong growth was experienced in the Waikato (+4.0% q/q) and ‘other’ North Island regions (+7.2% q/q), while activity in Wellington and the  South Island ex-Canterbury fell.
• Today’s figures have few implications for our views on Q4 GDP growth. Both the building work figures (and separate Wholesale Trade figures, where total sales values rose 3.0% q/q) were close to our expectations. There are a few partial indicators still to be released, but at this stage we are happy with our provisional Q4 GDP estimate of 0.7% q/q (3.1% y/y).”