Construction work has spiked for a second straight quarter, far outpacing market expectations, but economists suggest the numbers could flatter to deceive.

The value of construction work done jumped 15.7 per cent in the September quarter to $61.9 billion, mainly bolstered by a 33 per cent surge in engineering work, including mines, roads and bridges, to $34.2 billion.

Total building work on homes and non-residential buildings such as offices and shops fell 0.4 per cent to $27.6 billion in the quarter.

The market had expected a decline in overall construction work of 2.3 per cent, following a 9.8 per cent rise in the three months to June.

The outperformance was based on technical factors rather than a genuine resurgence in capital expenditure, JP Morgan economist Tom Kennedy said.

“As we noted in the second quarter, this is an implausibly large increase and is unlikely to represent genuine real domestic value-add,” he said in a note.

Mr Kennedy said he suspects it is a reflection of the bureau of statistics marking the full value of mining related structures as ‘work done’ in one lump when installation is completed, rather than incrementally.

Other economists said the strong numbers were likely due to imports of LNG installations for projects in Western Australia.

Stripping out the impact of the LNG platforms, engineering construction likely rose modestly, with particular strength in NSW and Victoria on the back of construction of public infrastructure, they said.

Outside of the apparent strength in engineering activity, other details in Wednesday’s report were soft, ANZ senior economist Felicity Emmett said.

“Both housing and non-residential construction fell modestly, while underlying engineering construction activity looks to have been weak in WA and NT,” she said.

“Overall, we expect private construction to make little contribution to GDP growth.”

JP Morgan’s Tom Kennedy said that the national accounts data are compiled differently, attempting to capture the flow of construction work and capital expenditure as it occurs over time.

“As a result, the surge in engineering work evident in today’s construction work done print will not be mirrored in the upcoming third quarter real GDP release,” he said.

 

By Prashant Mehra