Inflation up according to the TD Securities/ Melbourne Institute inflation gauge and normally that’s means more ‘upward pressure on interest rates’ headlines.
The gauge indicated that the inflation rate had accelerated last month, thanks to higher petrol and transport costs.
According to TD Securities/Melbourne Institute headline inflation rose 0.5 per cent in March contributing to an annual rate of 3.5 per cent.
That would be above the top end of the RBA’s comfort zone and add to pressure for a rate rise, a situation not helped by the strong retail sales figures in February.
But there was an equally fascinating report from the building industry from the ABS.
It seems investors could have moved back into the market in a big way reacting quickly to sharp rises in rents in cities like Sydney.
Building approvals were 10 per cent higher in February than in the same month in 2006, the best result for a while and the increase wasn’t in private housing so much as in ‘other dwellings’ which is where the investor business is measured.
While approvals to build private houses fell 0.3 per cent to 8,324 in February, approvals for apartments or renovations climbed 31.5 per cent to 4,552.
And the ABS reported that overall building approvals rose 10.6 per cent to 13,418 units in February, seasonally adjusted, from a downwardly revised 12,136 units in January while in the year to February, building approvals rose 10 per cent.
According to various surveys economists had expected approvals to rise one per cent.
The ABS reported:
· The seasonally adjusted estimate for private sector houses approved fell 0.3%, to 8,324, in February 2007.
· The seasonally adjusted estimate for private sector other dwellings approved rose 31.5%, to 4,552, in February 2007.
“The seasonally adjusted estimate for the value of total building approved fell 4.8%, to $5,642.3m, in February 2007. The value of new residential building approved rose 5.7%, to $2,909.6m. The value of alterations and additions rose 1.8%, to $463.3m. The value of non-residential building fell 16.6%, to $2,269.5m following a revised increase of 19.6% in January 2007.”
To say that economists and others were taken by surprise in the growth of non -private dwelling approvals would be an understatement. They will wait for another month or so before proclaiming that the investor driven side of the housing industry is back in full swing. And the next few months is likely to see that continue because of the run up to June 30 and all the tax changes.
This year’s run up to the end of June has been made more volatile with the superannuation changes.
Normal home building remains in the doldrums and the rise in new home sales reported last week by the Housing Industry Association is from a low base and is not contradicting these ABS figures.
But if investors are returning to their side of the industry then there will be some happy building products suppliers who were looking at no upturn in private housing for the rest of this year.
The question if investors return is whether this will put more pressure on capacity which is being strained by the infrastructure (roads etc) and resources boom: concrete, cement, tyres, steel wood etc.
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And another set of figures showed that growth in Australian manufacturing activity eased in March despite higher production.
The Australian Industry Group-Pricewaterhouse Coopers Australian Performance of Manufacturing Index (PMI), which measures new orders, deliveries, and employment, fell 1.7 points to 56.0.
(An Australian PMI reading above 50 points indicates that manufacturing is generally expanding, while a number below 50 points to a decline.)
Production grew at its fastest rate since late 2004 but growth in new orders, employment, supplier deliveries and inventories slowed.
Naturally the AIG said this didn’t change the need for interest rates to remain on hold.
According to the PMI growth was strongest in the clothing and footwear sectors, after easier times in January and February while there was stronger growth in food, beverages, wood, wood products and furniture for the second month in a row.
Offsetting this, growth slowed in chemicals, petroleum, coal products, miscellaneous manufacturing, construction materials, transport equipment and basic metal products.
