Construction likely to be a drag on Australia's GDP in 2016

Australian Bureau of Statistics said Wednesday that the amount of total construction work fell 2.6 per cent in the first quarter, missing expectations of a 1.5 per cent drop. The disappointingly large drop in construction work in the March quarter is expected to weigh on Australia's GDP growth. That represented the third consecutive quarter of falling activity, and reflects a broad pullback in the resources sector, Australian Bureau of Statistics said.

“Construction is now 7% lower than a year ago. This indicates that construction will subtract 0.4pp from Q1 GDP." said ANZ in a report.

Housing construction activity remains strong, continues to expand. Residential investment rose by 1% in Q1. Private engineering construction continued to fall heavily, reflecting the ongoing contraction in the resources sector. Engineering construction fell by 7% in Q1 and is down 21% over the past year.

"A record volume of work in the pipeline continues to underpin work done despite a general cooling in the housing market in recent months. While this backlog of work may support further growth in activity, we think housing construction is unlikely to be as significant a contributor to GDP in 2016 as it was in 2015." adds ANZ.