Australian private capital expenditure likely to have risen moderately in Q4 2017 - ANZ

Australia’s capex is likely to have risen moderately in the fourth quarter of last year, with both non-residential construction and machinery & equipment spending recording gains. According to an ANZ research report, CAPEX is expected to have grown 1.2 percent quarter-on-quarter in the fourth quarter, in line with moderate rises seen in the earlier three quarters. Spending on both buildings & structures and machinery & equipment are expected to have increased. This would be a moderate acceleration from 1 percent growth in the third quarter.

Previous week’s construction data were distorted by pay-back after the importation of several LNG platforms in the third quarter; however, abstracting from this, the total non-residential construction is expected to have been around 1.6 percent. Meanwhile, spending on machinery & equipment is expected to have grown modestly by 0.6 percent.

“We expect the fifth estimate for 2017-18 capex to be upgraded marginally to AUD112bn, from the previous estimate of AUD109bn. This result would imply ongoing improvement in the non-mining investment outlook, partly offset by further falls in mining investment”, stated ANZ.

Meanwhile, the first estimate for 2018-2019 capex is likely to indicate towards a continued growth of investment beyond the current year. ANZ’s raw estimate forecast of AUD 88 billion would suggest a modest increase in total capital spending. Once again the mining sector is likely to indicate a planned reduction in spending reflecting the completion of the last of the LNG plants, although the drag on growth would be smaller, with 2018-19 expected to see the conclusion of the unwinding of the mining investment boom.

Non-mining industries are expected to be planning a rise in investment, given the ongoing buoyancy in business conditions along with solid profit growth. The non-mining capex estimate for 2018-2019 is expected to be AUD 63 billion.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was slightly bullish at 74.3056, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 39.8036. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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