As expected, private capital investment fell sharply in the September quarter as the mining and resources boom went cold.
But investment planned for the current financial year continues to build with the fourth estimate showing a rise of 4% to a still considerable $120.353 billion. But that remains well under the levels of last year.
Coming on top of a 3.7% slide in the value of construction work done in the three months to September (and despite housing constriction hitting an all time high in the quarter), third quarter GDP has taken a couple of heavy body blows.
The 9.2% slide in spending in the quarter was a record and more than double the 4.4% drop in the June quarter Revised from the original 4% fall and a market forecast for a drop of just 2.9%.
Intended spending in estimate 3 showed a 9.9% jump in planned investment, the largest in five years for that estimate. The 4% rise in the 4th estimate is still considerable and will hearten the Reserve Bank which has been looking for a continuation of the small rebound in non-mining investment.
According to the Bureau of Statistics report, the 4% rise in investment the 4th estimate is being driven across the board, but not by the booming services sector which the ABs series finds very hard to measure and capture data.
Manufacturing investment will be up 1.9% from the third estimate, other selected industries expect a 6.1% jump in investment from estimate 3 and most surprisingly of all is that mining is saying the level of planned investment this year will be up 2.3% compared to the third estimate (but still down more than 30% from a year ago).
That is still a considerable $56 billion. Manufacturers are planning to invest just over $8 billion at this stage and other selected industries say they will invest $56 billion.
Looking at the first estimate issued in the December quarter report from the ABS, planned mining investment is down a $4 billion, but manufacturers has lifted their investment intentions by a solid $2 billion, and other selected industries have lifted their’s by around $13 billion.
As dramatic as the 9.2% fall is, it has to be pointed out that the data doesn’t cover all business investment (around two thirds at best).
The AMP’s chief economist, Dr Shane Oliver said "September quarter GDP growth is still likely to see a rebound to around 0.8% qoq though thanks to a likely 1.4 percentage point contribution from net exports and growth in consumer spending. It will mask continuing softness in overall demand though."
Current investment plans by business are down 21% on expectations made a year ago for the last financial year. This is largely due to the unwind in mining investment (-35%).
Although non mining investment is rising, it is still down on the level a year ago (around 4% to 8%). There is new non-mining investment happening, but as the above figures show, it is slow, just like so much other activity in the economy.
