The first of Australia’s Q3 GDP inputs arrives tomorrow with the release of construction work completed in the three months to September. As all of the attached charts show engineering work, largely as a result of the slowing mining capex boom, has been sliding since the end of 2012. While it still makes up a majority of all spending it is expected to extend its slide in the years ahead. As part of the RBA’s much-mooted ‘economic rebalancing’ monetary policy setting have been adjusted to help other sectors take up the slack left by this once-in-a-lifetime mining boom. While construction ex-engineering has started to tick up it’s still highly debatable that it will be able to entirely offset the decline expected.
For tomorrow markets are looking for a quarterly decline of 1% following a 1.2% contraction in Q2. Forecasts range from -3.5% to +0.6% reflecting the highly-volatile nature of the release. While the headline figure is important, perhaps of more interest will be the performance of residential construction during the quarter. The RBA have pinned many hopes to a strong rebound in this sector. If this doesn’t eventuate it will have implications for monetary policy in the first half of 2015.