Capital expenditure in the second quarter was weaker than anticipated and declined by 4% compared to the previous quarter. Equipment spending fell by 1.2% and building/structure spending fell by 5.6%. Estimate 3 for 2015/16 capex plans was $114.8bn, 10% higher than May’s Estimate 2 of $104bn but well down on the previous year’s Estimate 3 of $145bn. Given the relationship (see below chart) between the capex plans and actual expenditure, AMP’s chief economist Shane Oliver said the capex plans imply a 38% drop in mining investment in the 2016 financial year and a 7%-8% drop in non-mining investment, resulting in an overall fall of 23%-26%. Westpac said prior to the report they saw capex plans of $113bn as neutral but investment intentions in the services sector will be of more than passing interest to the RBA, which has previously stated it expects the near-term outlook for non-mining investment to be subdued.
