Today’s ABS Building Approvals figures show large declines in building approvals between April and May of 8.6% in Queensland and 6.6% across Australia.  Building approvals are generally seen as a leading indicator of construction work and economic activity more broadly, so today’s figures may cause some concern.

Of course, we had to expect something like this to occur, given that the temporary boost to the First Home Owners Grant as part of the stimulus package would have brought forward a lot of housing purchases and construction work.

Still, given recent weakness in retail trade as well, economists at CommSec are cautious:

Given the latest round of data, there are good reasons for the Reserve Bank to leave rates on hold for the next few months. Not only are retail sales holding at very weak levels, but the housing sector is showing signs of consolidation.

With the potential cooling of the economy, and the uncertainty around economic recovery in the US and Europe, it would be a brave Reserve Bank Board that put up interest rates in the near term.