The volume of residential building activity fell 1.8% in the June 2013 quarter, the first fall in a year

The volume of residential building activity surprisingly fell by 1.8% in the June 2013 quarter,  according to Statistics New Zealand.

It was the first fall in a year and followed a strong increase of 11% in the March 2013 quarter.

Bank economists think the surprising fall in activity could put downward pressure on the country's second-quarter GDP figures

The volume of overall building activity fell a seasonally adjusted 0.4 percent in the June 2013 quarter, after increasing 5.4% the previous quarter.

In Canterbury, non-residential building activity fell 17% in current prices in the June 2013 quarter, following an 18% rise in the March 2013 quarter.

Westpac senior economist Michael Gordon said the 0.4% drop in overall building work compared with Westpac's forecast of a 3% increase, with Canterbury being the main source of the "downward surprise" in the overall figures.

"Building activity was softer than we expected, putting downside risk on our forecast of 0.4% growth in June quarter GDP," he said. The June quarter GDP figures are set to be released on September 19.

"Building work put in place is lagging substantially behind building consents, which rose strongly over the quarter. So while these figures are a disappointment in terms of the June quarter national accounts, they don't detract from the sense that there is a tremendous amount of building work in the pipeline for the next few years. "

ASB economist Christina Leung said the decline in construction activity was unexpected, "and will weigh on GDP over the quarter".

"The decline in both residential and non-residential construction activity in Canterbury is concerning given our expectations the earthquake rebuild is gaining momentum.

"The issues the Christchurch City Council faced with its consent issuing process in recent months should not have been an issue for actual construction over Q2."

Leung said that along with the drought effects on agriculture production and primary manufacturing, the building activity result pointed to "fairly soft activity" in  the second quarter.

"Our interim GDP forecast is now flat, down from 0.2% - though further key Q2 data are yet to be released. 

"However, recent data point to strengthening activity heading into the second half of 2013, and we expect a strong rebound in economic activity in Q3 of around 1% [quarter-on-quarter] growth. In particular, Canterbury earthquake rebuilding will lift construction activity considerably over the coming years," Leung said.

Statistics NZ said the volume of non-residential building activity rose 1.4% in the June 2013 quarter, following a small fall in the March quarter.

Trends for all building activity volume continued to grow in the June 2013 quarter.

“The trend for residential building activity has been growing since September 2011, increasing by 33% over this time. The trend for non-residential building activity has risen 12% over the last year-and-a-half,” industry and labour statistics manager Blair Cardno said.

Overall building activity has been trending up since the most recent low point in September 2011, with growth of 23%. The current level of the trend for all building activity volume is now 17% lower than the peak eight years ago in the June 2005 quarter.

The trend for the value of all building activity in Canterbury, in current prices, has been rising for two years, and the level has more than doubled since June 2011. Across the rest of New Zealand, excluding Canterbury, the trend for the value of all building activity has grown 15% over the same period.