Building work volume falls again in September with consents yet to flow through (Update 1)

The volume of residential building work put in place continued to fall in the September quarter as rises in building consents since February were yet to flow through, figures released by Statistics New Zealand show. (Update 1 includes economist comments.) The seasonally adjusted volume of residential building work fell 5.4% in the September quarter from June to its lowest level in eight years, and was down almost 40% since its most recent peak two years ago, Stats NZ said. This was despite rises in building consents from their low in January and February, which indicate intentions to build and often take a number of months to flow through to actual construction. The unadjusted value of total residential building work put in place fell 25.7% in the September 2009 year from the year before, driven by a fall in new dwellings, Stats NZ said. ASB economist Jane Turner noted that to date the recovery in the housing market had not yet flowed through into a recovery in housing construction. "However, we expect housing construction will contribute strongly to growth in the first half of next year," Turner said. Here is the release from Stats NZ:

The seasonally adjusted volume of residential building work put in place has fallen by almost 40 percent since the most recent peak two years ago, Statistics New Zealand said today. The volume of residential building work put in place fell a further 5.4 percent in the September 2009 quarter, and is at its lowest level recorded in eight years. Recent Statistics NZ building consents releases have reported increases in the number of new housing consents issued. These increases are not reflected in an increase in work put in place for the September 2009 quarter, but indicate an intention to build. The seasonally adjusted volume of all building work put in place fell 4.9 percent in the September 2009 quarter, the seventh successive quarterly fall. These quarterly falls were mainly driven by falls in the volume of residential building, except for the September 2009 quarter, when non-residential building work fell by a similar amount to residential buildings. For the September 2009 year, the unadjusted value of all building work put in place was $11,106 million, down 15.9 percent from the previous year. The unadjusted value of total residential building work put in place fell 25.7 percent in the September 2009 year, driven by a fall in new dwellings. Hospitals and nursing homes was the largest contributor to the 0.8 percent fall in non-residential building work put in place for the September 2009 year.

Here is ASB economist Jane Turner's take on the tow sets of figures released today, which included manufacturing volumes and sales over the September quarter:

The weakness in manufacturing volumes and construction activity indicates substantial downside to our previous forecast for production GDP. We had been expecting a very slight increase, but we are now expecting a fractional decline in GDP instead. The overall condition of the economy in Q3 was that of one continuing to track sideways, as the recovery struggles to gain traction. Over the third quarter, momentum in house sales and lifts in volumes of non-meat and non-dairy commodity exports are likely to offset continued weakness in construction, manufacturing along with weak demand in retail and services sectors.

What is your view? Is this fall in building volumes due to consents having not yet flowed through? Or could it be the case that issued consents are not being acted on?