Building approvals are a reasonably good leading indicator of economic activity across the economy because the construction industry employs nearly 10% of the workforce (see this OESR table) and it buys a lot of products from other parts of the economy (e.g. timber, tiles). Hence it’s understandable the monthly building approvals data receive a lot of attention and I welcome the nice new note Residential building approvals – still a mixed bag that the HIA released yesterday. It contains a useful analysis of Queensland trends, identifying that, while Queensland is recovering in terms of approvals of apartment blocks and towers, it is doing poorly in the more important detached housing segment, as nicely illustrated in the HIA’s chart below.

The HIA concludes that Queensland and Victoria are detracting from the national outlook:

In conclusion, the evidence presented by approval data indicates that activity strengthened somewhat in the final quarter of 2012. This improvement has not been broadly based however, with contractions still being recorded in the vital detached house sectors of Queensland and Victoria. Encouragingly, detached house approvals in New South Wales showed brisk growth (from a recessionary base) and relatively strong figures were also recorded nationwide in the semi-detached and multi-unit sectors.

The next set of building approvals data will be released by the ABS on 4 March.