CAPEX better than expected

Private Capital Expenditure (CAPEX) for the second quarter was up 1.1% on a seasonally adjusted basis from the previous quarter. This result was significantly better than the market expectation of a fall of about 1%. CAPEX fell 4% from the same quarter a year ago. In Queensland CAPEX fell 2.1% for the quarter and 8.9% over the year; the greater declines in Queensland are not surprising given the State’s reliance on mining (which is the greatest source of the CAPEX declines nationally).

When considering the less volatile Trend series see we national CAPEX down 1.7% q/q for a 5.0% decline over the year. In Queensland the Trend series shows a 4.5% fall for a 11.1% decline over the year.

Investment into Equipment, Plant and Machinery, which will feed directly into next week’s GDP release for Q2,  fell 0.9% q/q reinforcing the feeling that Q2 GDP could well be weak.

The CAPEX data does not only focus on actual expenditure over the past quarter but also provides us with data on the total for the 2013-14 financial year and expectations for CAPEX in the coming year. The 7th (and final) estimate for the full 2013-14 year came in at $158bn which is down 1.7% from 2012-13 and a 3.2% fall from the 6th estimate (and also slightly below our own estimate of $160bn made last quarter…see here for previous commentary). Expectations for the 2014-15 financial year  (3rd estimate) were 5.1% higher than the 2nd estimate at $145bn; this was at the higher end of market expectations and is some evidence that there is the much-awaited shift from mining to non-mining investment starting to happen.

As we have said in the past; talk of a “CAPEX cliff” appear unwarranted, although a clear and steady decline in mining investment continues to weigh on investment and in turn therefore GDP, growth .

Chart: Financial year actual and expected expenditure- Total Capital Expenditure

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