Economists have been shocked by a 12.8% slump in building approvals for November 2008 and say the poor state of the housing sector could be a sign of impending recession.
Economists have been shocked by a 12.8% slump in building approvals for November 2008 and say the poor state of the housing sector could be a sign of impending recession.
Private home building dropped 9.7% in November, while the “other” dwelling sector, which includes apartments and units, crashed 21.9%.
Senior economist Brian Redican at Macquarie Bank described the data as a “shocking result”.
“Policymakers really need to get the housing market moving this year if a recession is to be avoided,” he told Reuters.
“These figures just underline the need to keep cutting interest rates to try and get some traction in housing.”
Construction sector struggles
Given the poor building approvals data, it’s little surprise that Australia’s struggling construction sector is likely to remain under pressure for most of 2009.
The Australian Industry Group’s performance of construction index shrank for the 10th straight month, dropping 1.1 index points in December to 30.9 points, well below the 50 point mark that separates contraction from expansion.
Even more worryingly, new orders also fell for the 10th straight month, indicating that a rapid recovery in the sector is unlikely. Credit remains difficult to obtain and big customers are simply unwilling to commit to projects.
AIG’s associate director of economics and research, Tony Pensabene, is pinning his hopes on public sector infrastructure spending.
“The current weakness in activity is likely to persist into 2009. That said, there remains hope that we will see an early improvement in engineering construction on the back of federal and state government funding commitments.”
Shares slide on bad news from Wall Street
The mini-rally on the Australian sharemarket came to an abrupt end this morning as shares slipped more than 2% in early trade after a rough night on Wall Street.
US stocks suffered their biggest fall in a month, with the Dow Jones Industrial Average sliding 2.7% after a survey of private businesses revealed employers shed 693,000 jobs in December, up markedly from the 476,000 jobs lost in November and well above economist estimates.
The market was also spooked by computer giant Intel, which said its revenue for the fourth quarter would not meet the lowered forecast it had given in November because personal computer sales have slowed dramatically.
The news reminded investors just how deep a recession the US could be facing.
In Australia, the benchmark S&P/ASX 200 index fell 2.3% or 88.3 points to be at 3691.4 points at 12:00 AEDST.
After posting some solid gains in recent days, mining stocks were sold off as global recession fears grew. BHP Billiton lost 5.1%, while a host of smaller zinc and iron companies shed around 7%.
Babcock & Brown on the brink
Investors are also nervously waiting for a further announcement from Babcock & Brown, which has gone into a trading halt pending restructuring talks with its banks.
Worryingly, the company told the market yesterday it believed its accounts will show a “substantial” negative net asset position at the end of 2008.
Babcock narrowly avoided entering administration late last year after its banks gave it time to sell assets.
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