Australian headline capital expenditure likely to have remained flat in Q1 - ANZ

The Australian headline capex number is likely to have remained widely flat for the first quarter, noted ANZ in a research report. The private new capital expenditure is expected to have risen 0.1 percent sequentially. The most significant part of the first quarter result is spending on plant and equipment, which flows straight into calculations for the first quarter GDP. According to ANZ, it is expected to have grown 1.8 percent sequentially, and combined with strength over the past year, will push annual growth to the most rapid rate since 2011. The positive spending environment would be in line with strong capital goods imports and surveys of investment intentions.

Meanwhile, spending on buildings and structures is expected to have come in subdued. Last week’s construction work done data showed that non-residential building was weak in the first quarter, and this is likely to translate to a moderate fall in buildings and structures spending, and weigh on overall capital expenditure.

The upcoming release on Thursday will provide an update on companies’ capex spending plans for 2018-2019. While these early estimates could be rubbery, they could be useful indicators of the health of the investment outlook.

“We expect that firms will revise their capex estimate for 2018-19 upward to AUD90.5bn, from AUD84bn in the first estimate. Assuming that this estimate follows the same pattern of upward revisions as last year, this would imply a 4.6% y/y rise in total capex”, stated ANZ.

Investment in the non-mining sector is likely to have revised higher to AUD 63 billion, suggesting an 8 percent rise on a year-on-year basis, consistent with the earlier estimate. Strength in business conditions, increasing capacity utilization and widely positive data flow over recent months are all likely to have underpinned a strong investment outlook, added ANZ.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was slightly bearish at -56.7339, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 87.6618. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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