Stats NZ reported:
Both residential and non-residential building activity volumes grew strongly in the March 2014 quarter, Statistics New Zealand said today.
“Overall building activity increased 16 percent in the March 2014 quarter,” business indicators manager Neil Kelly said.
Non-residential building activity volume grew a seasonally adjusted 17 percent, just ahead of 15 percent growth in residential buildings.
This is great. We need more homes, and they are being built. Expenditure on new residential buildings are up 58% from two years ago. And residential building consents up 30% on a year ago.
Instead, it appears that the country went on a building spree worthy of the characters in ‘The Lego Movie’. Building work put in place saw the biggest quarterly increase on record (going back to 1990 by volume and 1981 by value). The level of activity is now about 5% below the peak reached in the middle of last decade’s boom, and is on track to exceed those levels during this cycle, with the post-earthquake rebuild in Canterbury still ramping up.
This was a huge surprise relative to our forecast, with major implications for the March quarter GDP figures, to be released on 19 June. The construction sector contributes about 5% of GDP (though that includes infrastructure work, not covered in today’s release), so a 10% upside surprise for the sector equates to a 0.5% upgrade to our GDP growth forecast, all else equal. Until now we felt that there were modest downside risks to our forecast of 1.1% GDP growth; now the risk appears to be to the upside.
We await the GDP results with interest.