Australia building approvals sharply fall in July, AUD/USD remains subdued

Australia’s building approvals were down sharply in July, largely in payback from the strong gain in June and as we expected. Apartments drove the bulk of the fall, again as expected given the strength of this category in the prior month. Dwelling approvals are clearly trending lower, consistent with the signal from the housing finance data, according to the latest report from ANZ Research.

The country’s residential building approvals fell 5.2 percent m/m in July, close to what was expected. The already strong result for June was revised up a touch. Total residential approvals are down close to 6 percent y/y, the weakest result since August last year. Dwelling construction made a positive contribution to GDP growth in both Q1 and Q2 of this year, but is set to fade from this point on.

The strong gain in the value of non-residential approvals, up 31.5 percent m/m, reflects a big jump in office approvals in NSW especially and Victoria to a lesser extent. Non-residential approvals can be very lumpy from the month-to-month but the strength in July is encouraging and it was sufficient to mean the value of non-residential approvals is no longer trending lower.