Australia: Sharp decline in construction activity – Westpac

Construction work down sharply in Q4, falling by 3.0%, representing a weak end to a weak year for the sector, Andrew Hanlan, Senior Economist at Westpac Institutional Bank reports. AUD/USD trades at 0.6577 after falling with the news.

Key quotes

“Construction work fell in the final quarter of 2019, down by -3.0%, a sharper than expected decline (market median -1.0% and Westpac -0.6%).”

“With the construction sector representing around 13% of the economy, the 3% drop in work in the December quarter will have a material direct impact on overall growth.”

“The outlook for home building is a source of uncertainty. Dwelling prices have responded to the three RBA rate cuts in 2019, rebounding sharply. How quickly that translates into an uptrend in dwelling approvals is unclear, particularly for the key high-rise segment. We expect weakness in home building activity to extend into 2020.”