Australia will get its latest report card on business investment today with the release of private-sector capital expenditure (CAPEX) data for the September quarter.
This report captures investment from parts of Australia’s private sector, looking not only backwards but also where it’s likely to head in the quarters ahead.
While parts of it will feed directly into Australia’s Q3 GDP report next week, this report is unique in that it’s the forward-looking estimates on investment, rather than what has actually been spent, that markets tend to focus on.
That will undoubtedly be the case today.
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.
- In the June quarter, CAPEX rose by 0.8% to $28.275 billion, topping forecasts for a smaller increase of 0.2%.
- Within that figure, spending on equipment, plant and machinery — a direct GDP input — jumped by 2.7% to $12.489 billion, offsetting a 0.6% drop in investment on buildings and structures which fell to $15.786 billion.
- By sector, CAPEX for “other” industries — predominantly services — rose by 2.8%. Manufacturing CAPEX also increased by 1.4%, overriding a 2.8% decline in mining sector investment.
- Creating optimism towards the outlook for investment, the third estimate of expected CAPEX spend during the 2017/18 financial year jumped to $101.8 billion, well above the $95.9 billion level expected.
- It was also 17.6% higher than the second estimate offered three months earlier, led by sharply improved expectations for non-mining investment.
- Today, economists expect another solid result, mirroring the outcome seen in the June quarter.
- Looking backwards, investment is expected to have risen by 1% in the September quarter. Individual forecasts offered to Bloomberg range from a decline of 3.5% to an increase of 3%.
- While there is no forecast for spending on equipment, plant and machinery, economists at the Commonwealth Bank are looking for an increase of 2.5%.
- Looking ahead, the fourth estimate for 2017/18 CAPEX spend is expected to lift to $105.4 billion.
- Estimates tend to increase over time as operating conditions become more certain for firms.
- Within the fourth estimate, many will be looking at expected spend from other industries given the RBA’s increased optimism over the outlook for non-mining investment.
- As a guide, the third estimate for expected spend in 2017/18 rose to $61.44 billion, 19.4% higher than the second estimate.
- For those trading around the release, the fourth estimate for 2017/18 CAPEX spend will likely drive movements across Australian financial markets. The equipment, plant and machinery figure is also one to watch given its implications for next week’s September quarter GDP release.
The report will be released at 11.30am AEDT.
Business Insider will have all the details once it hits the screens.