Residential building down in June quarter

The value of residential building work fell by 9.1 on a nominal, seasonally adjusted basis over the June quarter, Statistics NZ said today.

Today's result followed a rise of 3.6 per cent in the March quarter, but when price changes were removed, the trend was down for the last two quarters.

Non-residential work was stronger. It dropped 3.6 per cent for the quarter, following a rise of 11 per cent in March, but trend-wise it continued to rise, even after price changes are extracted.

About 41 per cent of all building work for the June year was non-residential , up from 38 per cent in the previous year.

The value of all building work dropped $82 million or 2.5 per cent to $3.124 billion from the June quarter a year ago but was 7.2 per cent when price increases were stripped out.

Over the quarter the fall was 6.8 per cent.

The ANZ said the fall was larger than expected. Economists tend to use the real figures and on this basis, the bank noted that real seasonally adjusted building work had dropped 7.8 per cent in value over the quarter.

Real residential building work fell 10 per cent and non-residential 4.8 per cent.

The ANZ said the fall was in line with beliefs that the construction sector would contribute negatively to June quarter economic growth.

"The decline in building work is clearly at odds with the sharp increase in the HLFS (Household Labour Force Survey) construction employment number.

"This dichotomy confirms our view that firms have been hoarding staff, and the HLFS must be treated with caution."

The combination of falling activity, higher wages, lower productivity and higher construction costs all pointed to lower profitability for construction companies.

The ANZ is forecasting June quarter GDP (gross domestic product) of 0.5 per cent, taking annual GDP growth to 1.3 per cent.

It expects to see further softness in housing and consent data, particularly in the fourth quarter.

GDP data is released on September 29.

- NZPA