Second-quarter capex is due today, a report on business investment for the quarter and the year ahead
Two main figures to watch
- Q2 real capex … where we look for a print of -2 per cent and the market is expecting -0.9 per cent. There is a nuance of this figure in that only the “equipment, plant and machinery” component of this total feeds into next week’s GDP business investment figures so that component might influence market reaction. But the total initially will garner most of the initial headlines.
- The other key data point from this report is the capital spending expectations for financial year 2014-15. The previous survey had an expectation of $137 billion and we look for a very slight upward revision to around $140-145 billion. Anything less than last quarter’s expectation would be soft while a number closer to $150 billion would be encouraging.
- Expecting a raw non-mining investment estimate of $64.5 billion which would point to a modest improvement in non-mining business investment of around 8% y/y in 2014-15
- “Such an outcome would support our view that the transition to non-mining growth is occurring, albeit gradually, and as a result the RBA will keep interest rates on hold for an extended period to entrench the recovery in these sectors”
- Economists expect a decline of 0.9% following a 4.2% contraction in Q1.
- While the headline figure will grab the initial headlines, the equipment, plant and machinery print, something that feeds directly into quarterly GDP, along with the third estimate of 2014-15 expenditure, something that will hint at whether the economy is truly rebalancing (was $137.063b in the second estimate), will override all others when the data hits the screens later on this morning.
- A result today above A$152bn (for the estimate 3 of 2014/15 capex) would be an upgrade to capital investment plans while anything below A$150bn would be a downgrade
Bolding is mine