The resources boom remains intact, despite a surprise fall in actual new private capital spending in the March quarter.
Whereas the market had been expecting a 3% rise in actual new capital spending in the March quarter, the Australian Bureau of Statistics said it fell 2.5%, seasonally adjusted to $20.559 billion, from an upwardly revised $21.077 billion in the December quarter. (A revised increase of 7.3% compared to the initial 5.1% rise in the February figures.)
The slowdown points to a lower growth in gross domestic product in the March quarter, which will be released next Wednesday.
But it does not signal a slowdown in spending as the ABS is forecasting new private capex will reach $87 billion, the largest figure so far recorded.
The ABS said the sixth estimate for spending this financial year shows an 11.1% rise to a record $87 billion, compared to the same estimate for 2006-07. The sixth estimate is also up 1.3% on the fifth estimate in February, so there’s still growth.
The fall actual capital spending offsets the rise reported Wednesday by the ABS in construction work done in the quarter of a seasonally adjusted 2.3%.
That has lead to some economists wondering if the two figures might offset each other somewhat in the National Accounts next week.
The ABS said estimated spending on equipment, plant and machinery fell 2.6% while spending on buildings and structures in the same quarter eased 0.8% in seasonally adjusted terms.
Spending in the mining industry was up strongly: by around 10% while spending in manufacturing and other industries both eased, a sign perhaps of the tighter economic conditions and tougher monetary policy from the Reserve Bank.
The ABS gathers the estimates in a series of seven quarterly surveys, the first in January and February before the start of the financial year in July, and the seventh immediately after the financial year ends.
But while there was a slowing in actual spending (as there was in the September quarter) the forward estimates of spending in 2008-09 continue to grow.
According to the ABS, figures yesterday show the second estimate for the 2008-09 financial year has risen on the first estimate given in February with an estimated $84.83 billion to be spent, up 6.9% on February, and 19.5% above the same estimate in 2007-08 in May of last year.
The first estimate given in February for 2008-09 showed a 23% plus rise in the estimated level of spending.
That is still on track.
That puts spending on track to crack the $100 billion mark for the first time by the end of June 2009.
In fact the ABS said that "While there has been some tapering of the trend series the projections for total capital expenditure indicate renewed strength in the series to drive total Capex towards the $30,000m a quarter level by the end of the 2008-09 financial year".
The March quarter figures surprised economists as they noted there had been a solid 8% increase in the value of capital goods imports in the March quarter which suggested spending was growing.
A number of projects finished construction in the quarter and some commentators say there could have been deferments and cancellations because of the tight credit conditions. The most obvious deferment was the Moranbah ammonium nitrate plant in Central Queensland from Dyno Nobel.
But there have been reports of some projects being delayed or pushed out and not started.
It’s clear the mining boom is continuing.
That was apparent in last week’s figures from the Australian Bureau of Agricultural and Resource Economics which show that spending is heavy
ABARE said that mining and energy companies are developing a record $70.5 billion of new projects in Australia to meet growing demand from overseas for metals and energy.
The value of advanced projects is 62% more than the estimate a year ago: the record listing of 341 major projects includes 244 projects which are still undergoing feasibility studies.
It said the $70.5 billion of new projects reflects 97 advanced projects, defined as being under construction or committed to. Since October 2007, 58 new projects have been added to the list and 22 projects have been completed.
Energy projects account for around 55%, or $38.8 billion, of the estimated capital cost of all advanced major projects. Investment interest is also strong in iron ore (23%), alumina (7%) and gold (5%).
Here’s how the ABS dissected the March figures and the forward estimates of capital spending.
TOTAL CAPITAL EXPENDITURE
The sixth estimate for 2007-08 for total capital expenditure is $87,007 million. This is the highest sixth estimate on record and has shown an increase of 11.1% from the same estimate for 2006-07. There has been growth in both asset classes, particularly building and structures which rose 18.2% while equipment rose 5.0%. The sixth estimate is 1.3% stronger than the fifth estimate. A 4.0% rise in equipment was offset by a 1.4% fall in the building asset class.
The second estimate for 2008-09 is $84,835 million which is 19.5% higher than the same reading for 2007-08. This is also a series high. Both asset classes have shown substantial growth when compared to the second estimate of the previous year with building rising 21.0% and equipment rising 17.8%. The second estimate is also 6.9% stronger than the first estimate. Building is stronger in this comparison for 2008-09 rising 10.1% while equipment (3.3%) had a more modest rise.
BUILDING AND STRUCTURES
The sixth estimate for 2007-08 for the building and structures asset class is $42,608 million. This is a rise of 18.2% f
