Australia will get its latest report card on business investment later this morning with the release of private capital expenditure (CAPEX) figures for the March quarter.
It’s a report that captures investment from parts of Australia’s private sector, looking not only backwards but also where it’s likely to head in the future.
While parts of it will feed directly into Australia’s GDP report in two weeks time, the CAPEX report is unique in that its expectations for expenditure, rather than what has actually been spent, that markets tend to focus on.
Still, with retail turnover and residential construction weak in the first three months of the year, there’s likely to be plenty of attention on actual investment in the March quarter, particularly with expectations for GDP growth already so low.
Here’s the state of play.
- The CAPEX survey captures around 60% of total business investment, excluding spending from industries such as agriculture, health and education.
- CAPEX fell by 2.1% to $27.4 billion in the December quarter, a disappointing result that followed a 3.3% drop in the prior quarter.
- CAPEX at “other” industries — predominantly services — rose 1.8% to $16.3 billion, outpaced by a 3.2% increase in manufacturing investment to $2.08 billion.
- Overriding those improvements, mining CAPEX plummeted 9.3% to $9.2 billion.
- By component, building CAPEX fell 4.1% to $15.3 billion, partially offset by spending on equipment, plant and machinery which rose by 0.4% to $12.3 billion.
- Today, economists expect CAPEX to bounce in the March quarter.
- Of the 22 economists polled by Bloomberg, the median forecast is centred around an increase of 0.5%.
- Perhaps of more importance than the headline figure, particularly for those trading around the release, there’ll be plenty of interest on the equipment, plant and machinery figure, a direct input into Q1 GDP.
- There’s no forecast offered for this figure but ANZ’s economics team thinks it’s likely to increase by 1.5% given growth in capital goods imports during the quarter.
- Such an outcome would make a positive contribution to quarterly GDP.
- Previously expenditure in this category grew by 0.4%.
- In terms of the second estimate of 2017/18 spend — the figure that’s most likely to generate market volatility — the median forecast is looking for expenditure of $88 billion, higher than than the first estimate of $81 billion.
- Estimates tend to increase over time as strength in operating conditions becomes more clear to firms.
- Within the second estimate, many will be looking at expected spend from other industries, particularly as the RBA expects it to pick up in the quarters ahead. As a guide, the first estimate for 2017/18 was $46.8 billion.
The report will hit the screens at 11.30am AEST.
Business Insider will have all the facts and figures, and the potential implications for investors, as soon as it’s released.