Building activity picks up from historic low

Statistics New Zealand revealed the increase was led by a 4.4% increase in residential building activity.

"In Canterbury, there appeared to be a greater increase in building activity than in the rest of New Zealand," said industry and labour statistics manager Blair Cardno.

"This was true for both residential and non-residential building."

After adjusting for price and seasonal effects, non-residential building activity increased 1.4% in the December quarter, the rise coming after decreases in the three previous quarters.

However, Statistics NZ said the increase did not change the direction of the trend, which fell to its lowest level in nearly eight years, though the rate of decline has slowed.

In 2011, compared with 2010, all building work fell 10% ($1,141 million), residential work fell 14% ($865 million) and non-residential work fell 5.7% ($276 million).

ASB economist Jane Turner said that the lift in residential building followed on from a rise in residential building consents issued over the September quarter.

"Underlying building demand appeared to pick up around July and August of 2011, reflecting an increase in housing demand combined with a relatively tight supply of housing following a period of low construction," she said.

However, Turner said the latter months of 2011 saw that momentum stall and she expects construction activity to remain flat over the first half of 2012, though activity is predicted to increase rapidly once the Canterbury rebuild starts in earnest.

"Construction demand pressures are likely to outstrip capacity in the industry, and generate substantial construction inflation which the RBNZ will be very mindful of," she said.

"However, with ongoing seismic activity, the rebuild process is at risk of being further delayed until 2013.  As such, continue to expect the RBNZ will wait until December 2012 before lifting the OCR."