Aside from engineering and architectural design, one of the earliest requirements of a building project is to obtain approval from the relevant statutory body. As a result, building approvals data is a leading economic indicator of future construction. While not all projects which have been approved are completed, all completed projects have been granted approval. Approvals data thus provides a useful indicator of future construction activity.
The latest building approval figures have been released by the Australian Bureau of Statistics and figures for September indicated a small bounce occurred after falls in July and August. Seasonally-adjusted, total approvals increased by 3.3% in September, a little under the 3.8% increase expected and a significant turnaround from August’s revised figure of -8.1%. However, on an annual basis, total approvals fell by 14.1%, which is lower than August’s comparable figure of -12.6% after revisions.
Chris Read, Morgan Stanley Australia’s equity strategist, said the underlying components of the figures was a cause for concern. “The mix is also concerning; strength in the month was driven by a 10.7% increase in apartment approvals, only partially reversing August’s sharp decline. However detached house approvals, which are typically more stable, fell for the third straight month, only the second time this has happened since 2011.”
