The rise in interest rates has finally caught up with the building industry, with a very sharp slump being recorded in building approvals last month.

The news will keep the Reserve Bank’s hands from the interest rate lever later today and for several more months as the size of the fall has come as a surprise.

Figures from the Australian Bureau of Statistics shows that building approvals last month fell  14.8%, driven by a 13.5% slump in the number of new houses approved.

Just 8404 new private houses were approved last month, the lowest monthly total in 11 months and down almost 1300 from March.

The fall was much greater than economists’ 5% forecast.

It’s a sign the first house buyers building boom has run out of gas.

At the same time the volatile private sector other dwelling approvals fell 5.4% in April after a huge 58% rise in March.

As a result, the falls saw the seasonally adjusted estimate for the value of total building approved fall 13.3% in April.

The ABS said “the seasonally adjusted estimate for the value of new residential building fell 4.6% while the value of residential alterations and additions fell 8.4%. The seasonally adjusted estimate for the value of non-residential building fell 28.5%”.

Retail sales rose 0.6% in April, down from the 0.8% increase in March, which was a sharp upward revision from the originally reported 0.3% increase. Retail sales fell 1.2% in February.

The rise in April was double market forecasts of 0.3%.

And manufacturing still expanded, but at a much slower rate in May, according to the latest Performance of Manufacturing survey.

The rise in retail sales was driven by increases in three retail industry groups, according to the ABS. These were, household goods retailing (up 2.6%), food retailing (1.3%) and clothing, footwear and other personal accessory retailing (0.3%). The ABS said sales fell in department stores (-2.4%), other retailing (-0.7%) and cafes, restaurants and takeaway food services (-0.7%).

“South Australia (2.9%) recorded the largest rise in sales in April (seasonally adjusted), followed by Victoria (1.5%), Queensland (1.2%), the Northern Territory (1.2%), Tasmania (0.5%). Sales fell in New South Wales (-0.8%), the Australian Capital Territory (-0.3%) and Western Australia (-0.1%),” according to the ABS.

“In original terms, Australian turnover decreased 2.4% in April 2010. Australian turnover increased 0.9% in April 2010 compared with April 2009, the ABS added.

Get more Crikey, for less

It’s more than a newsletter. It’s where readers expect more – fearless journalism from a truly independent perspective. We don’t pander to anyone’s party biases. We question everything, explore the uncomfortable and dig deeper.

Join us this week for 50% off a year of Crikey.

Peter Fray
Peter Fray
Editor-in-chief of Crikey
50% off