Australia Capex: Disappointing but far from disaster - TDS

Annette Beacher, Chief Asia-Pacific Macro Strategist at TD Securities, notes that Australia’s June quarter real private capital expenditure (capex) fell -2.5%/q (mkt +0.6%/q) while the component that feeds into GDP, plant & equipment fell by -0.9%/q. Manufacturing +2.7%/q, mining -7.2%/q, services -1%/q.

Key Quotes

“Actual investment spend for 2017-18 was upgraded from $A117.7b to $A119b. Over the fiscal year, mining investment fell -7%, manufacturing expanded by +7%, while services investment jumped by +10% to $A73b.”

“The third estimate for 2018-19 was a healthy $A102b. Applying (new) rolling 5yr average realisation ratios, the adjusted spend is $A113.5b, with services spending expected to be similar to last year.”

“Ahead of inventories (-0.1%pt) net exports (+0.1%pt) and public spending (+0.6%pt) next week, our Q2 GDP tracking is +1.0%/q, leaving annual GDP growth at 3.1%/y. This is consistent with the RBA’s August projection of 3%/y for mid-2018.”