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Thursday, 28 November 2019

CapEx outlook fizzles

CapEx declines

Private new capital investment declined modestly in Q3, driven by a 3½ per cent decrease in equipment and machinery.

At the industry level mining and manufacturing investment is now increasing.

Unfortunately investment in other industries has been sinking for 9 months. 

At the state level investment in Western Australia has now been rising for 6 months after its brutal downturn. 

The wind-down in the gas mega-projects has now washed through, so investment in iron ore projects will lead mining and Western Australia higher. 

It's just a shame that the same can no longer be said of the three most populous states. 

More notably, the 4th estimate for 2019/2020 CapEx was only $116.7 billion, well below the $120 billion anticipated by markets, and only modestly higher than a year earlier, by 2½ per cent.

GDP fizzer

The early partials for GDP growth in the third quarter look to be weak, with declines in dwelling construction, a negative contribution from retail sales, and now another weak via partial from the CapEx figures. 

Net exports might deliver a contribution of ~0.2, but overall it's going to be another fizzer. 

The optimists will seize on the increase in annual GDP growth, as a weak result will drop off.