Q4 CAPEX will hit GDP. Forward estimate weak.

Today’s release of Private Capital Expenditure (CAPEX) for Q4 2013 shows a very sharp (and unexpected) slowdown from Q3. Seasonally adjusted data shows a contraction of 5.2% while the Trend estimate is a decline of 0.7%. Q3’s increase was revised down to +2.6% from +3.6%. The closely watched equipment, plant and machinery component fell 8.6% sa and 4.6% trend. Declines of this size this will see forecasts for Q4 GDP growth, to be announced next Weds, scaled back.
The 5th estimate for FY 2013-14 showed a modest 0.8% increase over the 4th estimate to $167.07bn and was 0.5% higher than the 5th estimate from the previous year. Historically the 3rd, 4th or 5th estimates (out of the total 7) tend to be highest estimates seen for each year and also tend to be somewhat optimistic. With that in mind it would seem reasonable to assume that the eventual actual CAPEX for FY 2013-14 will end up around $160bn; unchanged from FY 2012-13. More concerning is a very large drop in the first estimate for FY 2014-15 which came in at $124.88bn, a fall of 17.4% on the 1st estimate for 2013-14; the fall caused by a 25.2% decline in forecast mining CAPEX; the much-forecast mining investment cliff would appear to be upon us.
Things look a little better in Q4 when we consider QLD alone. Actual CAPEX in Q4 was flat (actually +0.1%); the only state not to record a drop. However, state data shows the expected decline for FY 2014-15 at 19.3% in QLD is even greater than that nationally. Again the fall is led by mining which is estimated to decline by 25.9% in QLD.
The A$ initially fell about half a US cent on the release but has since recovered a little of that lost ground.

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