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Residential building work surges in second quarter, beating estimates

Friday 2nd September 2016

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The value of residential building work put in place rose in the second quarter of 2016, led by Auckland, while total building activity increased to its highest level since records began 26 years ago.



The seasonally adjusted value of residential building work rose 7.3 percent to $3.1 billion in the June quarter from three months earlier, Statistics New Zealand said. Building work volumes grew a seasonally adjusted 5.5 percent in the quarter, with the trend reaching its highest level since the series began in 1989.



Total building work put in place beat market estimates of a 2 percent gain. In Auckland, the actual value of residential work in current prices surged 39 percent from the same quarter of 2015 to $1.8 billion, while in Wellington the actual value fell 8.1 percent to $314 million from a year earlier.



Among other regions, the total value of building work rose 36.5 percent in Waikato and 6.5 percent in Canterbury. The rest of the North Island recorded a 21.9 percent gain, while the South Island increased 12.9 percent. 



"Total building work put in place was much stronger than we and the market expected," said Jane Turner, senior economist at ASB. "While Auckland continues to lead the charge, the lift in construction is now fairly broad-based across NZ. While Wellington’s figures look a bit weaker in Q2, we are expecting some catch-up going forward given the rebound in consent issuance."



Turner said second-quarter construction activity growth was surprising given there had been a "soft patch" in consents earlier in the year.



"This suggests that capacity constraints and growing back-logs could be contributing to a strong pipeline of activity in the absence of new consent issuance," Turner said. "If this is the case, it reinforces the outlook for further increases in construction-related inflation. However, inflation pressures outside of construction remain very subdued."



The figures have boosted ASB's preliminary second-quarter gross domestic product forecast to 1.2 percent. That announcement is due on Sept. 15.

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