Despite all the gloom and doom on the sharemarket and in all that commentary about housing (and retail sales on Wednesday), the economy continues to grow at a weak, but unsurprising level.
If you had listened to some of the commentary about the fall in department store sales in August (which helped cut growth for the month to 0.1%, you would be thinking the economy was close to stalling.
But much of the media commentary was overblown nonsense, made more so by the strong building approvals data for August and a reasonable set of trade figures for the same month.
The good news on housing approvals saw total dwelling unit approvals rise in both seasonally adjusted and trend terms.
For a second successive month, there was a solid rise of 3%, seasonally adjusted, thanks to a rise in the volatile “other private dwellings” series (units, townhouses, etc) of 9.6%. Local councils approved the construction of 16,810 new homes and other dwellings in August.
That means developers continue to respond to rising investor demand (from local and offshore buyers for units and apartments.
These projects help boost demand for bricks, concrete, steel, household appliances, carpets, paint, wood and all the other accoutrements of housing construction, not to mention provide continuing employment.
That 9.6% rise more than offset a fall of 1.8% in private house approvals (which were up 1.3% in July).
It seems that while low interest rates are feeding more than is desirable into prices for existing housing stock in Sydney and Melbourne, they’re also driving housing construction, which is the point of the Reserve Bank continuing with its relaxed monetary policy.
In contrast, engineering construction figures for the June quarter, released mid week, showed the expected slowing in the pace of activity, as the mining investment boom fades.
With total approvals up 14% seasonally adjusted over the past year, there’s a solid backlog of activity to continue to boost domestic demand and employment well into 2015.
Engineering continues to return to more normal historical levels, and as the central bank has been saying for months, housing construction is picking up the slack (as we saw in the solid contribution to June quarter growth).
And the trade figures for August showed a fall in the size of the deficit, despite a fall in exports.
In seasonally adjusted terms, the trade deficit in the month was $787 million, down 27% from the July figure. Exports fell 2%, but imports were down 3%.
Exports of iron ore and coking coal performed well in the month, with shipments of iron ore fines (preferred by Chinese steel companies) up by more than A$1.2 billion.
