\n\tBy Greg Peel<\/p>\n
\n\tAustralia's March quarter capital expenditure growth came in stronger than expected at 3.4%, above a consensus estimate of 2.7%. It was not, however, growth in mining capex which drove outperformance as one might expect. Mining grew by only 2.8%, albeit the year-on-year increase is 21.3%. It was building and structures (up 4.5%) and equipment and machinery (up 2.4%) which caught out economists.<\/p>\n
\n\tThe stronger result has not affected economist expectations for the March quarter GDP result, which remains at a forecast contraction of 1.0% quarter on quarter, equating to 1.1% annual growth.<\/p>\n
\n\tEconomists assume the weaker than expected mining result reflected the weather issues which dominated the quarter. But what economists are really interested in is not the “what was” but the “what will be”, meaning capex intentions. Here, mining clearly dominates.<\/p>\n
\n\tCapex intentions indicate a downgrade in FY11 growth numbers in total capex to 15.8% from 23.7% at the last survey. But FY12 growth numbers have been revised up to 43.6% from 39.7%. Again, it appears the weather has delayed projects and shifted expenditure out on the time line.<\/p>\n
\n\tThe additional growth will all come from mining, with FY11 intentions dropping to 41.8% growth from 54.5% at last survey but FY12 lifting to an astonishing 108.1% from a previous 94.4%. But intentions from manufacturing and other industries is only expected to grow by 2.5% in FY11, down from 7.3%, and by zero in FY12, down from 3.1%.<\/p>\n
\n\tThe two-speed economy is alive and well and about to get aliver and weller.<\/p>\n
\n\tThis presents a dilemma for the RBA, which is forced to recognise the inflation threat posed by mining capex and associated labour cost increases, despite appreciating that a rate rise now will prove another kick in the side of the non-mining economy which is already down. Economists feel mining capex growth will mean another rate rise is inevitable, however ongoing weakness in non-mining will act as an offset to some extent.<\/p>\n
\n\tOn that basis, the ANZ economists, for one, remain convinced the RBA will not move until August. There are nevertheless those who are still backing June or July.<\/p>\n","protected":false},"excerpt":{"rendered":"
A snapshot of economist responses to today’s March quarter capex result, which indicated the upcoming capex surge will be greater than assumed but slightly later in its timing. RBA reprieve?<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[21],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/58208"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=58208"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/58208\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=58208"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=58208"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=58208"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}