Australian home-building approvals unexpectedly plunged in October and retail sales growth slowed, snapping the local currency’s three-day advance as investors raised bets the central bank will cut interest rates next week.
The number of permits granted to build or renovate houses and apartments fell 10.7 percent from September, when they dropped a revised 14.2 percent, the Bureau of Statistics said in Sydney today. None of the 20 economists surveyed by Bloomberg News predicted a decline. Retail sales in October gained 0.2 percent, half the increase economists estimated.
The reports add to signs that Europe’s debt crisis is weighing on Australian consumer sentiment even as a mining investment boom helps keep the nation’s unemployment rate near 5 percent. Reserve Bank Governor Glenn Stevens lowered the benchmark interest rate a month ago for the first time in 31 months, and money markets indicate an 86 percent chance he will ease again at a Dec. 6 meeting.
“There’s no doubt the consumer in Australia is finding it very difficult,” Bernie Brookes, chief executive officer of Melbourne-based Myer Holdings Ltd., the nation’s biggest department store chain, said in an interview today with Bloomberg Television. “A couple of rate cuts would certainly help our customers.”
Australia’s dollar weakened after the reports. The currency traded at $1.0197 at 1:33 p.m. in Sydney from $1.0283 in New York yesterday, when it rallied 2.8 percent.
Building approvals in October fell 29.8 percent from a year earlier, the report showed, the steepest drop since January 2009 and more than twice the 14.4 percent decline economists predicted.
“It seems like a combination of households being a bit more cautious about how they spend their money combined with a little bit of economic uncertainty in terms of what’s happening globally,” said Ben Jarman, a Sydney-based economist at JPMorgan Chase & Co.
Approvals to build private houses fell 7.5 percent to 7,042 in October from the previous month, the report showed. Approvals for apartments and renovations declined 16.8 percent to 3,241.
Department Store Sales
The retail report showed consumers spent 0.7 percent less at department stores in October, while spending on clothing and footwear rose 1.2 percent. A category that includes sporting goods, pharmaceuticals and newsstands dropped 0.4 percent, it showed.
Harvey Norman Holdings Ltd., Australia’s biggest electronics retailer, said in October that sales fell in the three months through Sept. 30. It cited the strength of the local currency and “intense competition” for the weakness.
Today’s reports contrast with other data this week that showed business investment jumped last quarter by the most in 15 years as the growth of mining projects accelerated.
Capital spending rose 12.3 percent from the three months through June, when it gained a revised 6.2 percent, a Bureau of Statistics report showed yesterday. The gain was the biggest since the second quarter of 1996 and was higher than all except one forecast among 20 economists in a Bloomberg News survey.
Demand from emerging nations including India and China, Australia’s biggest trading partner, is fueling the resource investment expansion. A survey today showed China’s manufacturing contracted for the first time since February 2009 as Europe’s crisis cut export demand.
The Purchasing Managers’ Index fell to 49.0 in November from 50.4 in October, the China Federation of Logistics and Purchasing said in a statement. The median estimate in a Bloomberg News survey of 18 economists was 49.8. A level above 50 indicates expansion.
“Overall, the data this week have been mixed and highlight the two-tier nature of the Australian economy,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at RBC Capital Markets in Sydney.
Stevens reduced the nation’s benchmark interest rate to 4.5 percent from a developed-world high 4.75 percent on Nov. 1, the first reduction since April 2009.
After cutting rates, Stevens noted stronger economic data in the U.S. and signs that Europe is getting its fiscal turmoil under control. “But it is likely to be some time yet before concerns about the European situation can definitively be laid to rest and the effects of the recent turmoil on confidence may result in a period of precautionary behavior by firms and households,” he said.
Australia’s employment growth has weakened this year from a record in 2010 and the jobless rate climbed to 5.3 percent in August before declining in October, the first drop in seven months.
Earlier today, a private survey showed Australian manufacturing contracted for a fifth straight month in November as weakness in industries outside mining outweighed strength at companies tied to the surge in resource extraction.