Construction growth: Multi indicators now pointing to a rebound

Multiple indicators are now pointing to a rebound in construction, with the sector seeing its first significant growth since the building downturn began.

Construction was the single biggest driver of economic growth last quarter – growing 2.7%, compared to an overall growth rate of 0.2%.

That followed an 11.9% contraction in the section December 2023 and March 2026, according to Stats NZ average annual GDP growth data, and the sector is still 11.1% smaller than it was at the end of 2023.

Just over 192,500 were working in the sector in July – up 2.6% since the start of the year, but still 8.4% lower than the almost 210,200 people working in the sector in November 2023.

Seasonally adjusted data shows building activity in the June quarter was up 6% on the March quarter, although it was still 10.6% lower than the December 2023 quarter.

Building consents – an indicator of planned building activity – were 7.7% higher than the low point reached in the March 2024 quarter, but were 8.9% lower than the September 2023 quarter.

Master Builders chief executive Ankit Sharma said most of its members are reporting a strong or steady pipeline, and they were seeing signs of improved business and consumer confidence.

He said Canterbury was seeing some of its strongest growth in recent years, driven by strong demand from first home buyers.

“The people who are migrating into Canterbury from Auckland and other regions are not worried about what’s happening with the economy and the election coming up – they actually want to buy a house for their family.

“They are also now seeing an uptick in people wanting to downsize into a lower-cost lower-maintenance home.”

Growth in construction can often lag behind growth in other sectors and BNZ Head of Research

Stephen Toplis said it was surprising to see construction driving economic growth at the moment.

“It’s bit a of a strange quirk that construction is doing as well as it is, but we do know that there has been quite a lot of work in terms of infrastructure build – hospitals, schools, the like.

“I suspect it’s revealing the momentum that’s coming through from the broader infrastructure build, and that includes private infrastructure and state sector infrastructure.”

Building and Construction Minister Simon Watts said the 2.7% quarterly growth was “material” and demonstrated the value of construction to the broader economy.

“Building and construction has come out of a downturn – we all know that since Covid – but this Government is seeing that as a significant area of priority.

“It’s an industry that grows and builds our country and we need it to be operating at full potential. Anything that we can do around removing red tape and bureaucracy is a good thing and we’re going to continue to do that.”

Employers and Manufacturers’ Association Head of Advocacy Alan McDonald said the businesses he was speaking to are extremely positive about the broader economic outlook, and consumer confidence should pick up in time.

“What we are seeing more of, and hearing more of, is our members are less concerned about what’s happening internationally or even domestically, and they’re just saying ‘we’re going to get on with it’.

“Business people are seeing and a bit more attuned to what’s happening going forward and they’re seeing that in their order books and those sorts of things. It takes some time for consumers to catch up.”

Michael Sergel is Newstalk ZB’s business reporter. He’s been covering business, politics, local government and consumer affairs for over a decade.