Residential building approvals had a solid correction lower after a strong rebound in July. The Australian dollar was weaker as this data combined with the latest trade figures gave markets the jitters.
The Australian dollar has lost ground on Wednesday owing to some less-than-spectacular international trade numbers.
Also adding downside pressure was the Australian residential property market which was today shown to have cooled over the past month.
The total number of approvals fell by 4.7% after a 10.2% rise in July (first reported as a 10.8% rise). Approvals are 7.7% higher than a year ago.
Private house approvals fell by 1.6% after a 2.7% rise in July to be 10% higher than last year.
Private unit approvals, which are very volatile, fell by 6.5% after a 24% rebound in July and are 3% higher than a year ago.
"Non-residential building approvals are extremely volatile, but appear to have lost momentum. Real non-residential building approvals are very volatile, but are very loosely related to the GDP measure of commercial construction and had shown improvement in the first half of 2013, up 7% in Q1 and 11% in Q2 to be 2% higher than a year ago," says Kieran Davies at Barclays.
However, monthly data on nominal approvals point to a loss of momentum, as they are down about 5% so far in Q3.
Davies says this is disappointing, as a pickup in non-residential building will be needed to help offset the looming mining led-decline in engineering construction.
"That said, business surveys have shown a pickup in confidence and a tentative improvement in conditions, which bears watching to see if it is signalling a turnaround outside of mining," says Davies.
Barclays believe that the outlook for the Australian housing and property sector remains positive:
"Very positive fundamentals still point to further strength in housing. Housing finance for new homes has given a less volatile and, hence, cleaner read on the trend in housing activity and remains strong, increasing at an annual rate of 16%.
"Our expectation is that activity will continue to do well, spurred on by a multi-decade low in mortgage rates and strong migration-led increase in population, such that housing should make a modest contribution to GDP both this year and next."