26 Nov 2015
AUD: Capex registers biggest quarterly decline on record - TDS
FXStreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities, notes that the Australian Q3 Capex proved to be a complete surprise for the market.
Key Quotes
“Actual Q3 capex dropped 9.2%, the largest quarterly decline since we have collected data back to 1998. The decline was due to actual mining investment falling 10.4% /qtr (not a complete surprise) but unfortunately services did not pick up the slack, which the market was expecting, with non mining investment declining a significant 10%/qtr.”
“If there is any consolation, it is that the drop in services investment may not be as large as today’s data suggests, given some key service sectors are missing from today’s report, the knowledge that NAB’s Business survey has been pointing to a rotation away from mining to services and that 2015-16 forecast capex is unchanged from the 3rd estimate.”
“The part of today’s report that feeds into GDP, Plant and Equipment fell 8.2%/qtr vs median forecasts for a 1% decline. This should see the market scale back initial Q3 GDP forecasts but should nonetheless remain above levels required to meet the RBA’s year end 0.6% GDP forecast.”
“Today’s data does not make a Dec RBA cut any more likely, but had expectations for 2015/16 capex dropped significantly, then the market would have priced in a much greater probability of the RBA cutting next year, but that was not the case.”
Key Quotes
“Actual Q3 capex dropped 9.2%, the largest quarterly decline since we have collected data back to 1998. The decline was due to actual mining investment falling 10.4% /qtr (not a complete surprise) but unfortunately services did not pick up the slack, which the market was expecting, with non mining investment declining a significant 10%/qtr.”
“If there is any consolation, it is that the drop in services investment may not be as large as today’s data suggests, given some key service sectors are missing from today’s report, the knowledge that NAB’s Business survey has been pointing to a rotation away from mining to services and that 2015-16 forecast capex is unchanged from the 3rd estimate.”
“The part of today’s report that feeds into GDP, Plant and Equipment fell 8.2%/qtr vs median forecasts for a 1% decline. This should see the market scale back initial Q3 GDP forecasts but should nonetheless remain above levels required to meet the RBA’s year end 0.6% GDP forecast.”
“Today’s data does not make a Dec RBA cut any more likely, but had expectations for 2015/16 capex dropped significantly, then the market would have priced in a much greater probability of the RBA cutting next year, but that was not the case.”