The Westpac analysts believe that the Australian Bureau of Statistics (ABS) CAPEX survey of private business investment plans due on May, 30th, will provide some further guidance on growth prospects.
Key Quotes:
“The March quarter update will be released on May 30, including the 6th estimate of capex plans for the 2018/19 financial year and the 2nd estimate of plans for 2019/20.
Markets will focus on plans for 2019/20. Estimate 2 for 2019/20 may, on the face of it, appear to be quite positive (as did Est 1).
However, we assess that Est 1 and Est 2 for 2019/20 are flattered by weak base effects (with Est 1 and Est 2 of a year ago relatively low compared to the likely outcome for 2018/19).
A more appropriate approach, calculations based on average realization ratios (RRs), will paint a less upbeat picture.
Also, we caution that estimates 1 and 2 can be an unreliable guide to actual spending – the degree of error varying from year to year. Plans begin to become more reliable when the outcome for the preceding year is known, that is from Est 3 on.
Of interest will be the mix of investment plans by industry and by the asset. The focus will be on the service sectors, which are more likely to be impacted by shifts in business conditions.”
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