Everyone’s a bit taken aback by the building approvals number released today, showing approvals were down 6.9% against analysts’ expectations of a 2% rise.
Even more reserved forecasters like Westpac who forecast a -1% result based on falling loan approvals in June were caught on the hop.
Jonathan Mott and co at UBS recently released some research on the home loan outlook that showed banks remain downbeat on demand for home loans over the next six months.
The construction industry is critical to Australia’s economy as the resources sector eases off. Most expect there to be a few stutters as the construction sector gets going but the data releases this week don’t exactly make for a reassuring outlook that it’s picking up speed quickly enough.
The Australian dollar fell by around half a cent on the release of the housing starts data at 11.30am AEST. Every notch downwards, of course, helps Australia’s export sector.
RBA governor Glenn Stevens is speaking this afternoon in Sydney and his speech will be closely watched for any expectation management on possible interest rates moves as Australia heads towards a federal election and the dollar continues its steady slide against the USD.
Today’s data makes it clear that the non-mining domestic economy is struggling to fire and makes it increasingly likely the RBA will cut rates at its next meeting.
That said, as the UBS team pointed out, there’s only so much the RBA can do.
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