Later this morning the Australian Bureau of Statistics (ABS) will release its 2015 December quarter business capital expenditure (CAPEX) report, an important component of Australian GDP that looks at business investment in the prior quarter as well as expectations for the year ahead.
Here’s the state of play.
- In the September quarter of 2015 business CAPEX tanked, falling 9.2% to $31.398 billion. Spending on equipment, plant and machinery — a direct input into Australian GDP — slumped by 8.2% to $11.565 billion, leaving it down 12.7% from a year earlier.
- Economists expect CAPEX to slide by a further 3% today, with spending on equipment, plant and machinery forecast to come in flat.
- While the latter will garner some interest given its implications for Q4 GDP, most attention today will be on estimates for business spending moving forward, particularly as markets will receive not only the fifth estimate for the 2015/16 financial year but also the first estimate for 2016/17.
- The fourth estimate for 2015/16 spend came in at $120.353 billion, 4% higher than the 3rd estimate but some 20.9% below the fourth estimate for 2014/15.
- The first estimate for 2016/17 is expected to be even lower with the median economist forecast looking for a decline to $93 billion.
- Inside the 2016/17 figure, markets should look for signs of a pickup in non-mining spending, if any, for the year ahead.
- Analysts at ANZ forecast non-mining spending of $51 billion, around 2% higher than the 2015/16 forecast. They believe a figure below $49 billion would be be weak, while an increase to $53 billion or more would be seen as strong.
- While the first estimate for each new financial year tends to underestimate actual spend during that year, the figure will likely be the most influential component of the CAPEX release today given its implications for monetary policy settings moving forward.
The ABS will release its report at 11.30am AEDT.
Business Insider will have full coverage as soon as the data drops.
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