Australia’s actual real capex likely dropped in Q1

The CAPEX survey will show on 26 May the Australian companies’ actual expenditure for the first quarter of 2016. It will also give an update on firms’ intentions for investment for 2016-2017. Non-mining companies’ investment intentions are likely to be updated slightly given an upbeat business environment in recent months, said ANZ in a research report. However, the mining outlook continues to be quite subdued.

According to ANZ, companies are likely to upgrade the estimate of new capital expenditure in this year to AUD 91.5 billion from AUD 82.6 billion. This indicates a 13% decline in nominal capital expenditure in the next financial year, as compared with an estimated drop of 15% in the previous quarter’s survey. The market is expected to respond more to the non-mining investment outlook.

“We look for the raw estimate of spending in that year to be revised up from AUD48bn to AUD54.5bn. This would point to investment falling by 2% in 2016-17, compared with the 5.5% decline implied by the previous survey and an estimated 2.8% decline in 2015-16”, added ANZ. 

An estimate more than AUD 56 billion might be seen as a positive result as it might suggest slight growth of 0.4% y/y in 2016-2017, noted ANZ. Meanwhile, result lower than AUD 52 billion will be quite disappointing that might imply the plans of businesses to have deteriorated in the last three months, in spite of a rebound in economic scenario.

On mining front, investment of around AUD 37 billion in 2016-17 is expected, suggesting that investment outlook continues to be weak, majorly unchanged from the previous quarter, according to ANZ.

“We expect actual real capex to have fallen 4.1% q/q in Q1 (mkt:-3.5%). Building and structures spending is likely to have driven the quarterly drop, with mining-related engineering construction continuing its trend decline”, said ANZ.