KEY POINTS:
The economic downturn has hit new house and commercial building jobs, a pattern economists predict will remain for some time.
Statistics New Zealand said the value of residential work fell 6.6 per cent in the March quarter and the value of commercial building work fell 5.9 per cent.
Nick Tuffley, ASB's chief economist, said he expected the residential work downturn to last for the rest of the year. Consents suggested non-residential work would be roughly flat during the next two quarters of this year, he said.
Robin Clements, UBS senior economist, said the drop in construction sector activity was in line with predictions and the timing of Easter appeared to have had an effect on activity levels, although it was not possible to quantify this.
Tuffley said he expected a fall of around 5 per cent in the sector, as residential work continues to respond to the weakening housing market and non-residential work has unwound.
But the implications of the latest statistics were that first-quarter construction activity was weaker than expected.
"We expect residential work to continue trending down over the rest of 2008. Consents suggest that non-residential work will be roughly flat over the subsequent couple of quarters amidst the usual quarter-to-quarter volatility," Tuffley said.
Shamubeel Eaqub of Goldman Sachs JBWere said construction activity had contracted by more than expected in both residential and non-residential activity levels.
"Overall activity in the construction sector looks set to slow, consistent with survey and consent data. This suggests further slowing in activity and heightens the potential for further job losses in the sector," he predicted.
Pieter Burghout, chief executive of the Registered Master Builders Federation, said he paid more attention to annual rather than quarterly data because the yearly figures showed quite a different picture.
Statistics NZ said that for the March year, the unadjusted value of residential building work was $8.6 billion, up 12 per cent from the March 2007 year. New dwellings contributed 84 per cent of this value. Alterations, additions and outbuildings contributed 16 per cent.
Burghout said that the amount being spent was probably the highest on record and showed the house building sector was in a particularly robust phase.
However, the federation acknowledged the less healthy quarterly data and expected market conditions to be relatively soft for the next year, he said. House builders took long holidays in January, one of the reasons for the slower quarter, he said.
Annual figures for commercial building work were also strong, he noted.
Statistics NZ said that for the March year, the unadjusted value of non-residential building work was $5 billion, down 0.4 per cent from the previous March year.
All building work for the March year was worth $13.6 billion, up 7.2 per cent from the previous March year. Residential buildings contributed 63 per cent, and non-residential buildings contributed 37 per cent.
