Housing Recovery Showing More Traction

Inflation in Q3 remained moderate and low enough to keep the door open for another easing, if need be. That “if need be” on rates is now looking less likely, in the wake various reports this week suggesting that the economy was showing a degree of upturn or at least resilience in September, especially housing, but also manufacturing. RBA Governor Stevens was also more strident with his comments on Monday, jawboning the AUD lower and if price action since is any guide, he’s had some success so far.

What we described last week as a hesitant housing recovery (new home sales, approvals, adding to housing-related GDP, as opposed to just re-sale prices) is now looking less hesitant and more encouraging. The HIA reported new home sales had risen a further 6.4% in Sept, buoyed by higher sales of detached homes. There was also a massive 14.4% step up in residential building approvals; even partly discounting for the volatile apartment sector where approvals numbers rose 31.8%, the trend overall is improving, underwriting some coming rise in dwelling investment. There was also a 4.9% recovery in “alterations and additions” approvals, a sign perhaps that higher re-sale prices might be sparking some recovery in housing improvement. Add to those reports another solid 1.3% rise in re-sale house prices in October, now up 7.9% in annual terms and that’s a housing recovery.

On the manufacturing front, the AIG Performance of Manufacturing Index rose to 53.2, the second reading above 50 in a row, signifying a modest expansion.