If anyone was looking for some certainty about the level of demand and direction of the domestic economy from today’s retail sales data and dwelling approvals, they will be disappointed.

On Tuesday the RBA essentially summed up recent growth as a little softer than trend. It’s hard to see any evidence from the Australian Bureau of Statistics today to contradict that.

Retail sales for August saw the big 0.8% fall in July transformed into a moderate rise of 0.2% (seasonally adjusted). The trend series showed a rise of 0.2%, down from 0.3% in July and June. Sales were originally reported as 0.4%, so there has been a downgrading of the growth momentum in retailing by the ABS, but it’s still there.

The ABS said that a big rise in spending at department stores in August (July’s 10.2% plunge in department store sales was partly reversed by a 6.9% rise in August) was the major contributor, followed by the now recurrent success story of retail, food retailing (up 0.4%), and other retailing (0.4%). Falls were recorded in household goods retailing (-1.5%), cafes, restaurants and takeaway food services (-0.9%) and perennial loser clothing, footwear and personal accessory retailing (-0.7%).

“Department stores remains the weakest performing industry over the longer term (down 0.4% in trend terms),” the Bureau said. “The strongest performing industry over the longer term was cafes, restaurants and takeaway food services (up 0.5% in trend terms).” WA saw the strongest growth (1.4%); Victoria went slightly backwards.

The ABS’s seasonally adjusted building approvals series for August reminded us again that they are useless because of their volatility, especially in the “other dwellings” section which covers home units and apartments. The ABS said building approvals rose 6.4% in August 2012, in seasonally adjusted terms, following a fall of 21.2% in the previous month. That was due to a 23.0% jump in other private dwellings in August, after a fall of nearly 47% in July. On a trend basis, the ABS said the estimate for total dwellings approved fell 0.1% in August after rising for 6 months.

The volatility was clear from the state totals: big rises in Victoria and WA, offset by a big fall in NSW. It’s all to do with the way local governments bunch their approvals. With September the last month in the quarter, there’s likely to be another big swing when that month’s approvals are reported in early October.

Private sector housing eased 0.5% in August, seasonally adjusted, but the trend estimate was up 0.7% and has now risen for the past three months. Is that what the Reserve Bank spotted and mentioned in the post-meeting statement on Tuesday?

The ABS said seasonally-adjusted approvals rose in Victoria (30.2%), Western Australia (16.1%) and Queensland (1.8%) but fell in NSW (-18.3%), South Australia (-1.0%) and Tasmania (-0.9%).  Seasonally adjusted approvals for private sector houses fell in NSW (-10.4%) and Queensland (-3.6%) but rose in WA (11.0%), SA (1.4%) and Victoria (0.8%).

The fall in NSW seems to be linked to the looming change in the first home owners grant from all houses, to newly constructed houses from October 1. Approvals fell as prospective new home builders held off until October 1. That should show up in the October approvals which will be out in two months’ time.

The ABS said the value of total buildings approved rose 9.4%, in seasonally adjusted terms, after falling for 2 months. The value of residential building rose 9.2% while non-residential building rose 9.8%.

Good luck trying to make sense of all that: the best approach is to watch the trend and wait out the current volatility; the best we can conclude is that residential construction has stopped its free fall, but whatever recovery it is experiencing remains tepid. And there’s no boom in retail, but it continues in a reasonably healthy way, unless you’re DJs or Harvey Norman or you own a clothes shop.

Peter Fray

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