South Australian Data Wrap – goods exports and building approvals at strong levels, but retail sales disappoint

South Australian merchandise exports remain at a strong level despite recent softening
The Australian Bureau of Statistics produces state level estimates of the value of overseas goods exports on a monthly basis. The latest estimates released last Thursday show that South Australia’s overseas goods exports have moderated over recent months, but remain well up compared to a year earlier.

The value of South Australia’s overseas goods exports for the three months to September 2017 was almost $3.0 billion measured on a free on board basis. The value of exports for this period was down 8.2 per cent compared to the previous 3 months to June 2017. Despite the recent fall, goods exports for the recent September quarter were still 20 per cent higher compared to the corresponding period a year earlier. This outcome reflects strong growth in overseas goods exports during the first half of 2017 following subdued performance in the second half of 2016.

The hefty rise in overseas goods exports through the year to the September quarter 2017 was brought about by large increases in exports for manufacturing (up $304 million / 20 per cent) and agriculture, forestry and fishing (up $123 million / 25 per cent). The growth in manufacturing exports was very much related to primary industries, with there being strong increases in manufacturing exports of food and live animals (up $119 million), and beverages and tobacco ($127 million), which mostly comprise wine. The other key goods producing sector – mining – also enjoyed a solid rise in exports over the past year ($34 million / 11 per cent).

Resurgence in building approval activity continues
As we have previously observed, building approvals for South Australia have risen strongly over the past year. ABS figures indicate that this pattern continued in September with the trend estimate of the value of total building jobs approved up 2.1 per cent. In comparison, national building approvals rose by 1.3 per cent. These results continue a recent pattern of stronger building approval activity for South Australia compared to Australia. Through the year to September 2017 the total value of building approved rose by 34 per cent for South Australia compared to 6.2 per cent for Australia.

The rise in total value of building approved for South Australia in September was driven by a solid rise in residential buildings approved (2.9 per cent), while non-residential building approvals were also stronger (0.8 per cent). Approvals for both forms of building activity have risen quite strongly over the past year (by 34 and 33 per cent respectively).

The number of dwelling units approved in South Australia rose by 1.5 per cent in September 2017 to be up 19 per compared to a year earlier. That the number of dwelling units approved has not risen as strongly as the value of residential buildings approved indicates that the average value of residential buildings approved has increased. Compositional changes in the types of dwelling units approved could also account for the rise in average value of residential buildings approved. Indeed, disaggregated data points to a shift over the past year towards increased approvals of new flats, units or apartments in large story blocks, combined with a substantial rise in the average value of these approvals. The average value of new houses approved has also risen modestly over this period (by 2.2 per cent through the year to the September quarter 2017 in original terms).

Retail sales remain flat
The underlying performance of South Australian retail sales continued to disappoint in September. Retail turnover in trend terms fell by 0.1 per cent in September, which is the third consecutive monthly fall. This recent deterioration follows strong growth during the first half of 2017.

The recent weakness in South Australian retail sales is consistent with national patterns. Australian retail sales were basically unchanged in September, and remained marginally lower compared to their level in June. Sluggish wages growth and sharp increases in utility bills have made for a challenging retail environment.

On a brighter note, the seasonally adjusted estimate of retail turnover for South Australia did rise by 0.7 per cent in September. While this result may point to an impending upturn in the retail sales cycle, monthly seasonally adjusted estimates are quite volatile, which means we will need to see sustained growth in the seasonally adjusted estimates for a couple more months to confirm an improvement in the underlying trend.

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