Australia’s private new capital expenditure rises sequentially in Q1, non-mining investment likely to grow

Australia’s first quarter CAPEX report released today came in widely positive, and the strength in plant and equipment spending augurs well for GDP. The outlook for 2018-2019 weakened slightly; however, it still suggests growth in non-mining investment, and the drag from the mining sector will continue to ease, noted ANZ in a research report.

Private new capital expenditure rose 0.4 percent sequentially, a rise from 0.2 percent seen in the prior quarter and above market projections of a rise if 0.1 percent. Details came in positive, with plant and equipment spending rising 2.5 percent sequentially. This is the fourth straight quarter of strength in this segment, and annual growth of 9.3 percent is the best result since the mining boom drive spending in 2011 and 2012.

Meanwhile, spending on buildings and structures was subdued, which was anticipated given the fall in non-residential construction in the quarter. The recent fall in commercial property approvals might challenge the expectation of solid activity in 2018-2019, stated ANZ.

The CAPEX report provided the second estimate of companies’ spending plans for 2018-2019. The data were slightly softer than anticipated, with non-mining investment now likely to grow by 5 percent year-on-year, down from the 8 percent growth expected three months ago.

The fall in mining investment is largely complete. Companies report that capital spending in 2017-2018 would be essentially flat as compared to a year ago, and currently expect just a 5 percent year-on-year fall in 2018-2019, said ANZ.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was slightly bullish at 54.3818, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -135.625. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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