Fall in Mining Investment Impacting Construction

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Tuesday, September 2nd, 2014
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Falling mining investment is likely to be a considerable drag on economic growth in the June quarter.

New data out on Wednesday showed the amount of construction work done in Australia fell 1.2 per cent in the quarter.

Engineering work done, which includes mines, roads, bridges and the like, was down 3.1 per cent in the quarter, the Australian Bureau of Statistics said.

But building work done in the quarter, including homes and non-residential buildings like offices and shops, rose 1.5 per cent.

JP Morgan economist Ben Jarman said the weak numbers do not bode well for next week’s June quarter gross domestic product (GDP) data.

“For engineering construction we’ve got this background story of mining capex (capital expenditure), just chipping away and becoming more and more negative over time,” he said.

“We are seeing more positive signs on the building side, we know that residential is coming though at a pretty decent rate, because we’ve had a pretty decent run up in building approvals for quite a while.”

March quarter economic growth was 1.1 per cent and 3.5 per cent for the 12 months to March.

Reserve Bank of Australia governor Glenn Stevens said in parliamentary testimony last week that it is inevitable that June quarter growth will be weaker than the strong result for the first three months of the year.

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