Australia will receive its latest report card on business investment later today with the release of capital expenditure (CAPEX) figures for the December 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.
While parts of it will feed directly into next Wednesday’s Australian GDP release, the CAPEX report is unique in that expectations for expenditure, rather than what has been actually spent, is what markets tend to focus on.
That will especially be the case today with the ABS releasing the first estimate of expected CAPEX for the 2017/18 financial year, a figure that will be scrutinised heavily for signs of an expected pickup in non-mining spending.
Here’s the state of play.
- In the September quarter, CAPEX tumbled 4% to $28.03 billion, missing forecasts for a smaller decline of 3%.
- That drop followed a contraction of 5.2% in the previous quarter, and left expenditure down 13.7% on the levels of a year earlier.
- All sectors — mining, manufacturing and “others” (predominantly services) — recorded a decline in CAPEX for the quarter, falling 7.2%, 1.9% and 4.9% respectively.
- The fourth estimate of 2016/17 CAPEX spend — where spending is expected to head — came in at $106.9 billion, a slight improvement on the third estimate of $105.2 billion but below expectations for a lift to $110 billion.
- Expected expenditure from “other” industries was the one bright spot, rising 4.7% from the third estimate to $58.5 billion.
- Today, economists expect CAPEX to have fallen again in the December quarter.
- Of the 23 economists polled by Bloomberg, the median forecast is centred around a decline of 0.5%.
- Perhaps of more importance than the headline figure, particularly for those trading around the release, many will be watching the equipment, plant and machinery figure as it will feed directly into next week’s GDP report.
- There’s no forecast offered for the figure, but ANZ’s economics team thinks it’s likely to be positive given growth in capital goods imports in recent months.
- The fifth estimate of 2016/17 CAPEX spend is tipped to increase modestly, something that tends to occur as business conditions become clearer to firms. Westpac’s economics team thinks it will nudge higher to $108 billion, although that would still leave it down around 15% from the levels of a year earlier.
- In terms of the first estimate of 2017/18 spend, the median forecast is looking at CAPEX of $84.8 billion, fractionally higher than than the first estimate of $83.9 billion seen in 2016/17.
- Alongside the headline number, there’ll be plenty of interest on expected spend from other industries, particularly as the RBA expects it to accelerate in the quarters ahead. As a guide, the first estimate for 2016/17 was for CAPEX of $43.2 billion.
The report will be released at 11.30am AEDT.
Business Insider will have all the details, including the ramifications for GDP growth and the outlook for interest rates, as soon as it arrives.