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StatSnack: is there a non-mining recovery?

The latest capital expenditure data from the Australian Bureau of Statistics continue to suggest the shift towards non-mining drivers of growth is occurring. The survey points to a rise in non-mining investment of just over 5 per cent in 2014-15 in nominal terms, while mining investment is expected to fall sharply.

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During the third quarter, real capex rose 0.2 per cent. Machinery and equipment investment, the only part of this survey that feeds directly into gross domestic product, grew a solid 4.4 per cent on the last quarter.

"The decline in mining investment is set to remain as a significant headwind to growth for some time yet."
ANZ Research

Non-mining capex rose a strong 4.6 per cent in the quarter, further highlighting the recovery in non-mining activity is occurring. 

The most important aspect of the report is the non-mining investment intentions, and on that front the data were encouraging. 

Adjusting for the typical bias in firms' investment intentions, non-mining investment intentions point to around a 5 per cent increase over 2014-15 in nominal investment in year-average terms.  This is consistent with other indicators which are also pointing to a pick-up in non-mining capital expenditure. 

Mining investment intentions suggest close to a 12 per cent decline over 2014-15 in year average terms. Overall, the survey suggests total capital expenditure is likely to fall by around 1 per cent in 2014-15 in year average terms. 

Howver, real capital expenditure was surprisingly resilient, rising 0.2 per cent against expectations of a solid fall. The strength was concentrated in machinery and equipment investment, the only part of the survey that feeds directly into GDP, which rose a strong 4.4 per cent. 

As such, these data provide some upside risks to third quarter GDP forecasts. Non-mining capex rose a very strong 4.6 per cent, lifting annual growth to just below 9 per cent. 

Further signs of an upswing in non-mining investment are very encouraging, but the decline in mining investment is set to remain as a significant headwind to growth for some time yet.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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