Australia Capex: Headline bad, details good – TDS

Research Team at TDS, suggests that the Australia’s 2nd estimate of Capex for 2016/17 shows glacial improvement in non-mining outlook.

Key Quotes

“Q1 real capital expenditure (capex) fell by –5.2%/qtr, weaker than expected compared with mkt –3.5% and so the AUD dived to $US0.716. However, the component that feeds into GDP—plant & equipment investment—fell by ‘only’ –0.5%, a stronger result compared with widespread expectations for a much larger decline. In addition, the planned (raw) spend for 2016-17 at $A89b was higher than expected, hence the AUD subsequently rebounded past $US0.72 on digesting this news.

Ahead of inventories, net exports and govt spending reports, we see Q1 GDP rising by +0.8%/qtr, a solid print that lowers annual GDP growth from 3.0% to on-trend 2.8%/yr. GDP is released 1 June, ahead of the RBA Board meeting on June 7 (no change expected to 1.75%).

Capex spending for 2015/16 was estimated at $A127b (raw, adjusted -17%) which was a marginal upgrade across the board.

Capex spending for 2016/17 was $A89b (raw, adjusted -20%) was higher than expected in raw terms, but more or less unchanged in terms of shrinking by 20%.”