National Australia Bank:
- Building Approvals is a notoriously volatile monthly series and we have no strong predisposition for September’s reading, out Thursday.
- Solid underlying population demand points to activity remaining high; we look for a 1.1% gain in September, some modest growth also hinted at by the AiG PCI Construction Index.
- We think building approvals increased by 0.7% m/m in September. It is likely that we have already seen most of the declines in approvals from the earlier peak.
- Strong housing finance approvals and solid confidence in the sector mean that approvals and construction activity should stabilise around these still-elevated levels.
- Dwelling approvals rose 0.4% in Aug, essentially holding steady after an 11% jump back in June. The detail showed high rise approvals continuing to pull back sharply but offset by a strong lift in non-high rise approvals.
- We expect the support from non-high rise segments to drop away this month. After showing solid gains in previous months, construction-related housing finance approvals — a reasonable proxy for non high rise approvals — pulled back sharply in Aug-Sep. While there is invariably some slippage between finance and dwelling approvals, the non-high rise segment is unlikely to see continued strong gains. With high rise still winding down we expect total approvals to fall 3% in the Sep month.