Aside from engineering and architectural design, one of the earliest requirements of a building project is to obtain approval from the relevant statutory body. 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 they indicate the downtrend which started in mid-2018 may not have ended after all. Seasonally-adjusted, total approvals fell by 15.5% in March, which is below the market consensus figure of -12.5% and a marked reversal from February’s revised figure of +19.1%. On an annual basis, total approvals fell by 27.3%, as compared to February’s comparable figure of -12.3% after revisions.
Reactions in local financial markets were minimal. By the end of the Australian trading day, 3-year Treasury bond yields were unchanged at 1.27%, 10-year yields had gained 1bp to 1.81% but 20-year yield slipped 1bp to 2.22%. Cash futures prices mostly moved in a direction which implied a lower likelihood of rate cuts in 2019 and 2020 but only in a technical sense. A rate cut before the end of August is still viewed as a certainty and an additional cut before the end of November has been assigned a 78% probability.