Australia will get its latest report card on business investment today with the release of private-sector capital expenditure (CAPEX) figures for the June 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 quarters ahead.
Although parts of it will feed directly into Australia’s GDP report next week, this report is unique in that it’s expectations for expenditure, rather than what has been spent in the past, that markets tend to focus on.
That’s likely to be the case yet again 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 March quarter, CAPEX rose by 0.3% to $27.97 billion, a disappointing result following a 1% drop in the December quarter of 2016.
- By sector, investment in “other” industries — predominantly services — fell by 0.5%, offset by a lift in mining and manufacturing CAPEX of 0.4% and 6.6% respectively.
- By category, spending on equipment, plant and machinery — a direct GDP input — fell by 0.1% to $12.133 billion. Expenditure on buildings and structures rose over the same period, increasing by 0.7% to $15.836 billion.
- In terms of the outlook for investment, the second estimate for 2017/18 CAPEX spend rose to $85.436 billion, below the $88 billion level expected.
- Today, economists expect both actual and expected CAPEX to have increased in the June quarter.
- For actual spend during the quarter, the median economist forecast is centred around an increase of 0.2%. Of the 18 economists polled by Bloomberg, individual forecasts range from a decline of 4% to an increase of 2.5%.
- While there is no forecast for spending on equipment, plant and machinery, ANZ is expecting it to increase by 1.6%. The CBA shares a similar view, forecasting a smaller lift of 1.4%.
- The third estimate of 2017/18 spend is also expect to increase to $95.9 billion.
- Estimates tend to increase over time as operating conditions become more certain for firms.
- Within the third estimate, many will be looking at expected spend from other industries, particularly as the RBA is looking for an increase in this sector to help lift economic activity in the years ahead.
- As a guide, the second estimate for 2017/18 was $50.541 billion, 6.2% higher than the first estimate and 6.5% above the second estimate offered for the 2016/17 financial year.
- Given strength in the NAB business survey and PMI reports on manufacturing, services and construction sector activity levels from the Ai Group, if there is a risk for the third estimate today, it’s likely to be to the upside.
- For those trading around the release, it the expected CAPEX spend that tends to drive movements across Australian financial markets. The equipment, plant and machinery figure is also one to watch given its implications for next week’s June quarter GDP release.
The report will be released at 11.30am AEST.
Business Insider will have all of the details as soon as it hits the screens.