Australia’s mining capex plans for FY 2016-17 likely to have fallen 30 pct

Australia’s capital expenditure by the mining sector is expected to have continued with its rapid decline in the second quarter, based on the maturing of the resource investment boom. But a slower rate of contraction is expected as compared with the first quarter freefall of 12 percent in sequential terms.

It is likely to have shrunk 7 percent in the second quarter, noted Societe Generale in a research report. This would be in line with the easing in the downtrend in the mining sector’s capital expenditure plans, as shown by the quarterly survey.

However, other sectors are likely to have made up certain slack. Although small, the capital expenditure plans survey for the manufacturing sector indicates towards rises, yet the first quarter data for actual expenditure recorded a decline of 10.3 percent quarter-on-quarter. A strong rebound is expected, said Societe Generale.

In the meantime, the ‘other selected industries’ (services) are expected to have grown their capital expenditure modestly. The business confidence has remained strong, rising further in the second quarter from the already above-average levels in the first quarter.

“Capex plans for FY2016/17 are likely to have continued to decline at rates around 30% in mining, but in manufacturing double-digit increases are likely and there is a good chance plans in other selected industries will have turned positive versus a year ago”, added Societe Generale.

However, the overall plans are expected to go downhill due to the disproportional weight of the mining sector in the survey.