Australia: Mining capex to offset non-mining capex weakness – ANZ

Analysts at Australia and New Zealand Banking Group (ANZ) offer a sneak peek at what to expect from Wednesday’s Australian Q3 Capex data that will drop in at 0030 GMT.

Key Quotes:

“When the Q3 private new capex data comes out on Thursday 28 November, we expect there will have been a small (0.3%) q/q rise. This would follow a cumulative fall of 1.8% over the previous two quarters.

We could see a downward revision to non-mining firms’ investment growth plans for 2019-20, with the weakness in business conditions worsening in Q3. This would be consistent with our Capex Leading Indicator (Figure below).

In more positive news, mining recorded its strongest quarterly capex result in five years in Q2. We expect mining firms’ plans for a significant expansion in capex in 2019-20 will be largely unchanged in Q3, with a number of multi-billion-dollar iron ore projects locked in.

This would see total capex plans (including both mining and non-mining) upgraded to AUD121bn in Q3, which would imply a 6.1% y/y increase.

A new estimate of AUD125bn or above would signal that firms remain optimistic about capex plans, despite headwinds. However, a new estimate of AUD118bn or below would raise concerns that the weakness in business investment may be more entrenched.”