Economists see a stellar 5.8% seasonally-adjusted rise in the volume of building work in the three months to March as meaning good news for the quarter's GDP figures, to be released later this month.
Statistics New Zealand (SNZ) reports that as part of that 5.8% rise in volumes, residential building activity across the country jumped 12% in the quarter, the highest increase in 10 years.
SNZ said the trend for overall building activity continues to grow, and is currently 22 percent higher than the low point of the September 2011 quarter. The last time it was higher was in the September
2008 quarter.
Westpac economist Nathan Penny said the 5.8% figure for the quarter "left our 1% pick in the dust".
"The building survey provides substantial upside risk to our forecast of 0.8% growth in March quarter GDP, and as such leans in the direction of higher interest rates. That said, there was no market reaction following the release."
ASB economist Christina Leung said the pick-up in construction activity in the quarter was "stronger than we expected".
"...This will boost GDP and offset some of the negative effects of the drought in Q1. In particular, residential construction is ramping up, reflecting earthquake rebuilding in Canterbury and increased house-building demand in Auckland. We expect these factors will continue to support stronger residential construction activity over the coming year."
Westpac's Penny said Canterbury was the standout region.
"In value terms, both residential and non-residential activity posted gains over 20% in the quarter. Canterbury non-residential activity even exceeded activity in the rest of country combined. In any other quarter we would be waxing lyrical about solid gains across the rest of the country. As it stands, residential activity posted a 11.4% gain in the rest of the country in value terms."
He said the Canterbury rebuild was "rapidly gathering steam".
"The reality of the rebuild is proving even stronger than the bullish expectations we laid out more than a year ago.
"The next stage we will look out for is signs of capacity constraints emerging. The final stage will be inflation pressure. That said, we have highlighted in the past that the coming boom in building activity would not be solely a post-quake reconstruction story. Quake-strengthening work will be a factor in other regions too, and housing construction will need to lift in some areas, particularly Auckland, to absorb population growth," Penny said.
In a similar vein, ASB's Leung said capacity pressures and construction cost inflation would be important developments to watch as construction activity continued to ramp up over the coming year.
"While the overall inflation environment is subdued for now, the extent to which these capacity pressures lift underlying inflation pressures will be a key consideration for the RBNZ. We continue to expect the RBNZ will first lift the OCR in March 2014."
5 Comments
"The reality of the rebuild is proving even stronger than the bullish expectations we laid out more than a year ago.
Why doesn't Fletcher Building Limited's capitalisation reflect the excitment - share price @~$8.29 down a ~$1.0+ from late January 2013 $9.52 highs. Or is this just another pump and dump story?
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