Your 10-second guide to today's Australian CAPEX report

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Later this morning the Australian Bureau of Statistics (ABS) will release its March quarter business capital expenditure (CAPEX) report, an important component of Australian GDP that looks at current levels of business investment as well as expectations for the financial year ahead.

Here’s the state of play.

  • In the prior quarter, CAPEX increased by 0.8% to $31.941 billion after seasonal adjustments, a sharp improvement on the 9.2% decline registered in the third quarter of 2015.
  • Although slightly ahead of expectations for a drop of 3%, it left expenditure down 16.4% on the levels of a year earlier.
  • Spending on equipment, plant and machinery – a direct GDP input – increased by 0.1% to $11.54 billion, leaving it down 12.4% year-on-year.
  • The first estimate on 2016/17 CAPEX — a guide on future spending — slumped, falling to $82.572 billion, down 19.5% on the first estimate offered for the 2015/16 financial year.
  • By industry, the first estimate for mining sector CAPEX came in at $34.351 billion, down 36.2% on that offered for 2015/16. Other industries — namely services — indicated that spending would come in at $41.641 billion, down 2.5% on the first estimate offered a year earlier.
  • Turning to today’s release, CAPEX in the three months to March is tipped to have fallen by 3.0%. Perhaps of more importance given its implications for GDP, spending on equipment, plant and machinery is expected to slide by a smaller 2.0%.
  • The second estimate of 2016/17 CAPEX is expected to increase to $86.7 billion, up 5% from the first estimate. This tends to occur as uncertainty over the operating environment tends to dissipate, allowing businesses to firm up investment intentions.
  • Markets will pay close attention to the breakdown between mining and non-mining investment, particularly that for services.
  • In terms of market reaction to the data, the CAPEX estimates, followed by the equipment, plant and machinery figure, will be highly influential on movements in rates, the Australian dollar and stocks.

The report is scheduled for release at 11.30am AEST.

Business Insider will have full analysis as soon as the data hits.

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