7 Nov 2013
Huge jump in Australian construction index, will the RBA like the number?
FXstreet.com (Barcelona) - The astounding rise in the Australian Performance of Construction Index from 47.6 to 54.40 suggests the economic transition into a more expansionary housing-driven sector continues.
However, the data should be taken as a double-edged sword for the interest of the Aussie, as the release communicates to the market a significant increase in housing supply looming, an event which should tame housing bubble concerns.
The soaring index may indicate a reduction in the risk of inflating what is perceived as a housing bubble in Australia - if recent surge in house prices is any indication -, but most importantly, it takes pressure off the RBA if they decide to cut rates again, in order to assist the economic transition, as they see 'an uncomfortably high AUD', still as a threat.
On the other hand, the strong data, which follows other improved releases, may also raise speculation about a rate hike. As Stephen Koukoulas, Managing Director of Market Economics, notes on his Twitter account: "I can't find a recent data point that has been soft let alone weak. RBA might hike in Dec but certainly Q1 2014..."
However, the data should be taken as a double-edged sword for the interest of the Aussie, as the release communicates to the market a significant increase in housing supply looming, an event which should tame housing bubble concerns.
The soaring index may indicate a reduction in the risk of inflating what is perceived as a housing bubble in Australia - if recent surge in house prices is any indication -, but most importantly, it takes pressure off the RBA if they decide to cut rates again, in order to assist the economic transition, as they see 'an uncomfortably high AUD', still as a threat.
On the other hand, the strong data, which follows other improved releases, may also raise speculation about a rate hike. As Stephen Koukoulas, Managing Director of Market Economics, notes on his Twitter account: "I can't find a recent data point that has been soft let alone weak. RBA might hike in Dec but certainly Q1 2014..."