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The all-important housing construction cycle continues to show only a weak recovery to date, with national dwelling approvals showing a sporadic but upward trend (see chart 2). In August, the number of total dwelling units approved declined by 4.7% m/m (to 13,687, seasonally adjusted), following a 10.2% m/m increase in July. In trend terms approvals are up by 10.3% p.a. over the year to August, suggesting  that the housing recovery remains intact. August’s monthly decline was largely driven by a decrease in private sector “other dwellings” (units, townhouses, etc) which fell by a seasonally adjusted 6.5% m/m after a strong rise of 24.4% m/m in July. Private house approvals fell by a seasonally adjusted 1.6% m/m in August after a 2.7% m/m rise in July. Approvals for private sector houses in August are now 10.3% p.a. higher than a year ago (down from a 11.7% p.a. annual rate of growth in July). The trend in house approvals remains positive (up 10.2% p.a. in August compared to 10.7% p.a. in July). In trend terms, total building approvals are up by 5.8% p.a. over the year to August, easing from 6.4% p.a. in July. In value terms, non-residential building approvals increased by 3.9% m/m in August. Approvals in this sector tend to be very ‘lumpy’ due to the prevalence of a smaller number of larger projects. Although the value of approvals has recently turned south again, the trend in approvals in the past 12 months suggests a moderate upturn in commercial building activity in some locations over the next 12 months.

In other construction-related data released this week, the value of engineering construction work was broadly unchanged in Q2 2013, falling by 0.5% q/q to $30.5bn (seasonally adjusted). In Q2, work done for  the public sector rose by 1.7% q/q while a 1.2% q/q decline was recorded in work for the private sector. The Q2 2013 data confirms a slower growth pipeline of engineering construction work from here, with the value of private sector work yet to be done down by 5.9% p.a. to $135.8bn in the year to Q2. The winding back in mining investment is reflected in a fall of 1.7% p.a. in the pipeline of work in the oil, gas, coal and other minerals (or mining) in Q2, after increasing by 25.1% p.a. in Q2 2012. Declines in work yet to be done were also recorded in sectors with strong links to resource investment including roads (-37.4% p.a.), rail (-55.2% p.a.) and other heavy industry (-29.7%). Encouragingly, there were areas of non-mining engineering work that showed solid growth in the pipeline of work yet to be done Q2 2013, including bridges (+50.1% p.a.), water and gas pipelines (+21.1% p.a.) and telecommunications (+27.9% p.a.). Growth in the latter sector reflects strong NBN-related investment. While higher levels of activity in these areas will help to cushion the impact of the slowdown in mining construction, non-mining work being commenced is still at low levels. A stronger pick-up in non-mining construction will be needed to offset the slack from weaker mining-related construction.


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