NZ: Q2 building work weaker than expected - Westpac

Satish Ranchhod, Senior Economist at Westpac notes that New Zealand’s construction activity was weaker than expected in the June quarter, falling by 0.5% (vs. our expectation for a 4% rise).

Key Quotes

“Underlying the softness in June were the ongoing wind back of building activity in Canterbury, as well as softening residential construction in Auckland.”

“Key points:

• Building activity was weaker than expected in the June quarter, falling by 0.5%. 
• Construction activity has been dampened by the ongoing wind-down of reconstruction activity in Canterbury, however home building in Auckland has also declined. 
• There is a large pipeline of planned construction work. However, the combination of stretched capacity, rising costs and tighter credit conditions means that building activity is likely to increase at a gradual pace over the coming year. 
• Today’s soft turn reinforces our expectation that GDP growth is set to underperform the RBNZ's forecasts, and adds to the case for the OCR remaining on hold for an extended period.”