NZ: Significant challenges for construction industry - ANZ

Analysts at ANZ note that the New Zealand’s construction industry is dealing with significant challenges as firms are experiencing financial strains and there are reports of unsustainably thin margins.

Key Quotes

“At the same time, the industry is struggling to keep up with demand in the face of capacity pressures. Labour shortages are a much-cited problem, but problems run deeper; as well as issues with contracts and boom/bust dynamics, the productivity performance of the industry is poor and needs to be addressed.”

“In light of these challenges, we believe it will be difficult to achieve further increases in construction activity from here, despite strong demand. Our central expectation is that the industry continues to muddle through at still-high activity levels, but recent events highlight that it is not an easy road ahead.”

“This week brings the RBNZ’s August Monetary Policy Statement. We expect the OCR track to be similar to last time, with continued neutral messaging given offsetting developments.”