/www.bloomberg.com/By Victoria Batchelor
Sydney, Oct. 1 (Bloomberg) -- Australian building approvals surged to the highest level in eight years and retail sales rebounded in August, suggesting the central bank may raise interest rates before the end of the year.
Building approvals jumped 23.1 percent from July. The median forecast of 19 economists surveyed by Bloomberg News was for a 2 percent drop. Retail sales rose 0.2 percent after falling by the same amount in July. Economists expected a 0.7 percent rise.
``The odds on a rate rise before the end of the year have lifted,'' said Michael Blythe, chief economist at Commonwealth Bank of Australia. He expected of a 9 percent jump in building approvals.
Extra building and consumer spending will underpin the economy. Still, Australian bonds and the dollar were little changed after the report, with investors focused on falling global stocks and expecting the central bank to leave rates unchanged at a meeting today. It releases its decision tomorrow.
All 22 economists expect the central bank to keep its overnight cash target rate at 4.75 percent because of the faltering global economic recovery and a slump in global stock markets. The Standard & Poor's 500 Index and Dow Jones Industrial Average had their largest losses last quarter since the 1987 crash.
Half of the economists expect a rate increase before the end of the year to ward off inflation.
``There's good sense in maintaining the current levels of interest rates given the global uncertainties,'' said John McFarlane, chief executive of Australia & New Zealand Banking Group Ltd., the nation's fourth-largest lender.
Building Stocks Rise
``If the levels of growth continue to be relatively very strong, there may be an argument for subduing that a little bit,'' McFarlane told reporters in Melbourne.
The yield on the bond maturing May 2013 rose 1 basis point to 5.34 percent at 12:30 p.m., Sydney time. A basis point is 0.01 percentage point. The Australian dollar fell to 54.21 U.S. cents from 54.26 cents before the report was released.
Building stocks gained, with the S&P/ASX 200 building materials index rising 0.3 percent. Boral Ltd., the nation's largest seller of concrete, gained 2.2 percent to A$4.27. Wesfarmers Ltd., which owns Bunnings hardware stores, gained 0.4 percent to A$27.17.
``The Reserve Bank is now faced with the quandary of responding to a potentially over-heating housing market in the face of a cool global economy and very cold equity markets,'' said Glenn Maguire, chief economist at SG Australia Ltd. ``At this stage, the Reserve Bank is on hold'' because of the global outlook.
Economy Expanding
The economy expanded 3.8 percent in the second quarter from the same period a year earlier, driven by consumer spending. Consumer spending accounts for about two-thirds of economic activity.
Today's building report showed 17,554 new dwellings and renovations, worth A$4.67 billion, were approved by local government authorities in August. That money is still to be spent in the economy. The number of approvals was the most since August 1994.
Pacing the retail sales gain, sales at department stores rose 4 percent and sales of clothing and soft goods gained 4.3 percent. Sales of household goods declined 1.3 percent.
The economy added 88,500 jobs in August, the largest increase in 11 years, which bolstered spending. Consumer confidence rose 2.7 percent in September, according to a Westpac Banking Corp. survey.
Woolworths Ltd., the nation's largest grocery chain, said today it expects profits to rise at least 10 percent this year. The company has a 28 percent share of the food, liquor and grocery market in Australia.
``We are very bullish,'' Chief Executive Roger Corbett told reporters in New York this week. ``We expect to see business continue to go the way it is.''