The QII Capex survey – what to expect
The next ABS survey of capital spending plans is released on Thursday
A 3rd estimate dollar figure of $161bn would be sufficient to keep the capex share of GDP roughly constant in 2013/14.
The composition of spending plans will be just as important as the bottom
line given the need to lift non-mining activity.
The ABS survey of capital spending will be published on Thursday. This survey will provide an estimate of actual capital spending in QII and the 3rd estimate of planned capital spending for 2013/14.
A range of indicators paint a relatively soft picture for QII spending. Capital goods imports rose in the quarter. But non-residential building approvals and commercial vehicle sales fell. Business credit rose only modestly. RBA business liaison indicates that the investment phase of some mining projects is now winding down. We expect actual capital spending to fall by 4% in the quarter.
The construction pipeline remains at elevated levels. But the omens for planned capital spending are not exactly propitious either. The ABS survey straddles July/August, a period characterised by global growth concerns, low business confidence and elevated political concerns.
The 2nd estimate of capex plans published three months ago, and other data available since then, point to nominal capex growth of around 5% in 2013/14. Growth at that pace would be sufficient to keep the capex share of GDP roughly constant.
To confirm that outcome remains on track we would need to see an 3rd estimate dollar figure of around $161bn (or some 3% higher than the 2nd estimate). A dollar estimate of $157bn or less would imply a significant downgrade in plans.
Note that the ABS often significantly revises the historical data which then affects forecasts for spending plans.
The composition of spending plans will be just as important as the bottom line. Figures on planned mining capex are unlikely to shift views that spending has peaked and about to turn down in a significant fashion. We need to see a lift in non-mining capex plans to support the growth transition.