Private Capex Numbers For March Are Appalling But The Underlying Trend Is Good

Getty/Paula Bronstein

The ABS has just released the latest Private Capital Expenditure and Expected Expenditure report for the March quarter which showed a big seasonally adjusted drop of 4.2% in the March quarter.

This is much worse than the markets expectation of 1.9% which Westpac said traders were expecting earlier this week.

Some commentators are saying this is a bad number and certainly it is a much bigger fall than the market expected. But to put this in context Westpac was expecting a 5% call so it’s not out of market by any stretch.

The key here is what the economy is going to look like in the future and what business is planning given the expected mining cliff.

The good news is that the 2nd estimate of total new capex in the 2014-15 financial year is up by around $13 billion from the last estimate a quarter to $137.1 billion.

The ABS notes this is still 12% lower than the 2nd estimate for this financial year but the key here – given the shock of the first estimate – is that this estimates upgrades investment intentions.

Picture: ABS

The ABS says that the major contributors to this increase were other selected industries (+$5.914 billion) and Mining (+$5.757 Billion)

The upgrade in expectations of investment and the usual path of how capex expectations and actuals flow mean this looks like a good number.

David Scutt writing in his new marketscuttlebutt blog said that “the numbers quite strong despite a dismal headline print”.

Others are not so convinced but the key here is that while investment intentions are lower than last year but still higher than the 2009-10 and 2010-11 financial years.

That’s good news for the economy.

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