First quarter private capital expenditure figures have now been released by the ABS and the -5.2% quarter-on-quarter figure was worse than the 3.5% decline expected by economists. Year on year, capex was 15.4% lower, the result of business investment falling back after the mining investment spike of 2011/2012.
10 year bond yields initially fell before recovering slightly to finish the day 3bps lower at 2.245%.
The AUD similarly was sold off against the USD before finishing the day higher at 72.25 US cents, which indicates the currency market viewed the data in less negative light than the bond market. Generally the figures were greeted without enthusiasm, with ANZ describing the downgrading of non-mining firms’ investment intentions for 2016-17 result as “disappointing”. However the bank pointed out the survey “misses some key non-mining industries.”
Prior to the release Westpac had expected a pessimistic result but added policymakers, especially at the RBA, would be particularly interested in the investment intentions of the service sectors which are “a key element in the economy’s successful transition from growth led by mining investment to strength across the broader economy.”
Estimate 6 for 2015/16 capex plans is now $126.8 billion, 2.3% higher than February’s Estimate 5 of $124 billion but 15.3% lower on the previous year’s Estimate 6 of $149.8 billion. Estimate 2 for 2016/2017 is now $89.2 billion and 6.3% higher than Estimate 1 but also less than the corresponding estimate from one year ago.
