Concrete data points to New Zealand building, construction slowdown

Ready-mix concrete production fell sharply in the third quarter. Photo / 123RF

The trend of declining ready-mixed concrete production continued in the third quarter, according to Stats NZ data.

The actual volume of ready-mixed concrete produced was 1.05 million cubic metres in the September quarter, down 10 per cent compared with the September 2022 quarter.

In the year to September, 4.28 million cubic metres of ready-mixed concrete was produced, down 11 per cent compared with the same year-ago period.

In seasonally adjusted terms, the volume of ready-mixed concrete fell 0.8 per cent in the September 2023 quarter, following a 0.7 per cent fall in the June quarter.

BNZ senior economist Doug Steel said the data pointed to an eventual decline in building activity.

Concrete production in the second quarter was also weak.

“On a seasonally adjusted basis it’s another decline - that makes it seven in a row and 10 per cent down on the quarter, which suggests building activity is declining,” he said.

“We think that there is going to be a material drop in building activity over the coming quarters,” he said.

“At minus 10, it increases the risk that at some point we will get a quarterly slowdown in building activity,” he said.

Going back a year or two, concrete production was at very high levels.

“It has been coming off those high levels and the quarterly slides are adding up,” Steel said.

The data, along with other manufacturing data, pointed to an economy going backwards.

Activity in New Zealand’s manufacturing sector dropped further during October, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for October was 42.5. A PMI reading above 50 indicates manufacturing is generally expanding, while below 50 indicates a decline.

“This was down from 45.1 in September, and the lowest level of activity for a non-Covid affected month since May 2009,” the bank said.

The October result represented the fifth consecutive drop in activity levels and was significantly below the long-term average activity rate of 52.8.

Steel said it was no secret that global manufacturing had been struggling in 2023 - all the major countries and regions the BNZ tracks show PMIs being sub-50 in October.

“New Zealand is no different in that regard,” he said.

“However, New Zealand has departed from the global average over recent months with its sharp downward acceleration to now be clearly lower than the already low readings prevailing across the globe.”

BNZ expects economic growth to be flat over the third quarter.

But market watchers will have to wait until December for the next batch of gross domestic product (GDP) data to find out how much or how little the economy grew over that period.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.