Australian private new capital spending falls in Q4 2017, but outlook remains positive

Australia recorded a mixed CAPEX report for the fourth quarter. Private new capital spending disappointed slightly in the December quarter. It fell 0.2 percent following three consecutive rises. Delving into details, spending on plant and equipment rose strongly by 2.2 percent after an upwardly revised 2.1 percent rise. In the meantime, non-residential construction spending dropped 2.1 percent, with a sharp decline in mining investment driving the weakness.

The report had a first estimate for firms’ 2018-19 CAPEX plans, which were a bit below market projections. Significantly, though, suggested growth for non-mining investment over the forecast period continues to be strong. Adjusting for the tendency for companies to understate investment at this point in the cycle, the figures indicate towards a rise in non-mining investment of 9 percent year-on-year in 2017-2018 after a rise of 8 percent year-on-year in 2018-19.

These initial estimates are especially rubbery and are often subject to large revisions over the next 18 months. However, they act as a constructive guide for the medium-term confidence around investment spending and on that front continue to imply quite a positive outlook, noted ANZ in a research report.

“For the mining industry, the future is looking a little less negative. The implied fall in investment for 2017-18 is now 8 percent (significantly more modest than the 16 percent drop forecast three months ago), while spending is expected to be down only 5 percent in 2018-19, pointing to a much reduced drag on growth”, added ANZ.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was neutral at -21.2876, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 48.6044. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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