We had another reminder yesterday why the monthly building approvals data from the Australian Bureau of Statistics are an unreliable indicator (and should not be taken all that seriously at times) of the strength or weakness in tracking what is going on at the front end of the home and apartment building chains.
After months of falling approvals, and amid expectations from economists of a 1.8% fall in February, the ABS data for February showed a surge, yes a surge of 19% seasonally adjusted from January.
That produced an improvement in the annual rate of fall to 12.5% (against forecasts around 27%) and the January fall of 28%.
The rise was driven by the usual influence for big swings in this statistical series – apartments and townhouses. This time it was a big rise in approvals of 64.6%, which is plainly silly.
There have also been big falls in approvals for the same reason – a sharp drop in apartments and townhouses.
It is largely driven by rises in Victoria (37.3%) and New South Wales (25.2%), according to the Australian Bureau of Statistics. And that is usually caused by local governments being slow to sign off on approvals and bunching them into one huge lot for bulk approvals.
The reading for private sector house building approvals showed a clearer picture of the weakness in the homebuilding sector. They fell 3.6% in February to be down an annual 13.8%.
And the trend figures also give a far more accurate picture than the seasonally adjusted data which are now notoriously volatile for reasons beyond the ABS’s control.
On a trend basis, there was a rise of 0.4% in total approvals in February compared with the 3.2% dip in January. On an annual basis in trend terms, the fall was 21.2% against 27% in January.