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Stagnation in construction - blow to AUD


27 February 2020

According to data released today by the Australian Bureau of Statistics, the volume of completed construction projects, seasonally adjusted, in the fourth quarter fell by 3.0%. This value turned out to be worse than forecasts of economists, who expected a decrease of only 1.0%.

How to understand this and what to expect


The construction boom in Australia has been around for 5 years. In fact, work done in both New South Wales and Victoria has increased by more than 40% from 2014 to 2019, peaking about 18 months ago, and is now falling by 15% from its highs. It is precisely this dynamics that we are observing - a cyclical weakening in the construction sector.

There will be no improvement in the near future, moreover, the current phase of the recession is also facing problems with the infrastructure destroyed by the fires and the effects of the coronavirus.

The fall in housing in the December quarter means that housing investment will hinder economic growth. Tomorrow we will get another “GDP riddle” with data on business investment. With a probability of 90%, the data will show a weakening of investment in construction, which in theory should provoke another wave of sales on the AUDUSD currency pair

#source

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