Australia: Q3 capex came in as expected at 1% - TDS

Analysts at TDS note that Australia’s headline Q3 capex came in as expected at 1% and the figure that feeds into GDP – Machinery, plant and equipment rose 0.7%/qtr, though this should do little to impact next week’s Q3 GDP forecast of 0.7%/qtr, 3%/yr.

Key Quotes

“The 1% increase in Q3 capex was driven by a 2.1% rise in services investment (~60% of capex), but manufacturing fell –2.7%/qtr ( <10% of capex). The Raw 4th estimate of 2017/18 capex at A$108.9b was in line with TD’s forecast but exceeded market forecasts. After adjusting for realisation ratios (the value the RBA looks at), the 4th estimate of 2017/18 capex comes in at A$114b, in line with 2016/17 capex. The estimates point to non-mining sectors driving capex activity going ahead, today’s data reinforcing the RBA’s message.”

“The number of Building Approvals for Oct rose 0.9%/m, better than the mkt f/c for a 1% drop. We had anticipated a stronger outcome given the run up in the no of housing finance commitments for New Activity. The read thru - a strong pipeline of construction activity should be supportive for growth. In terms of value, residential building approved rose 5.4%, but non-residential fell 10.1%/m.”

“Private sector credit rose +0.4%/mth in Oct, led by a +0.5%/mth growth in housing (owner-occupied +0.6%, investor loans +0.2%). Growth in other personal credit was flat.”