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Andrew Hanlan, analyst at Westpac, notes that in Q2, Australia’s capex spending declined by 0.5% and while this was broadly as we anticipated, the mix differed – with equipment stronger and building & structures softer.

Key Quotes

“Equipment rose by 2.5% despite the risk of a soft spot associated with heightened uncertainty ahead of the May Federal election. Building & structures declined by 3.3%.”

“By industry, mining capex rose by 1.7%, only the 3rd quarterly gain since 2014. Services capex fell for a second consecutive quarter, down by 2.4%. Manufacturing remains volatile, rebounding by 8.5%.”

“Turning to 2019/20, recall that Estimate 2 of capex plans for the 2019/20 year was $99bn, 12.8% above Est 2 of a year ago.”

“Estimate 3 printed at $113.4bn, meeting our expectations.”

“Estimate 3 is 10.7% above Estimate 3 a year ago. So on this basis, this update represents a modest downgrade on that from three months earlier.”