Analysts at Australia and New Zealand Banking Group (ANZ) offer their quick reaction to the Australian Q3 Capex data released earlier this Thursday.
Key Quotes:
“Capex fell 0.2% q/q in Q3 following a 0.6% q/q decline in Q2. Machinery and equipment investment drove the weakness, with a 3.5% drop, which will shave just under 0.2ppt off Q3 GDP. Non-residential construction was much stronger, rising 2.7%. Annual growth for overall capex remains in negative territory (-1.3%).
The weak tone of the report was amplified by the downgrade to investment intentions. While mining firms remain fairly positive, non-mining firms have lowered their expectations and now plan to reduce investment by 3% in the current financial year (compared to expectations of a 6% rise last quarter). This is a disappointing outcome and likely reflects weak business confidence amidst global uncertainty.
Mining firms are more upbeat and are planning to increase investment by a strong 16%, although that is down a little from the 21% increase planned last quarter. Coal and iron ore investment continues to recover while oil and gas capex looks to be bottoming out.
The RBA are likely to be disappointed with this report. If the cut to investment plans eventuates, it will weigh on the recovery in growth, eventually flowing through to a weaker labour market.”
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