Capex – QII 2013
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Actual capital spending rose but still below year earlier levels.
Actual capital spending rose by 4.0% in QII but is 2.3% below year earlier levels
- Together with yesterday’s data on building activity, business investment will have a negligible impact on QII GDP growth.
- The 3rd estimate of planned capex for 2013/14 confirms mining capex has peaked but the hoped‑for lift in non‑mining capex remains elusive.
The QII outcome for actual business capex was stronger than expected but has little direct implications for QII GDP forecasts. The 4% rise reflected a 6.4% rise in mining capex and a modest 0.7% rise in non‑mining capex. The data confirms that the mining capex peak has arrived and that the desired lift in non‑mining capex is yet to show in any decisive fashion.
Capital spending plans for 2013/14 were on the soft side but not exceptionally so when judged against the background of when the survey was undertaken. The ABS survey straddles July/August, a period characterised by global growth concerns, low business confidence and elevated political concerns.
There is a wide variation within the mix of planned spending, however. The data again fit in with the expectation of a mining capex peak. Manufacturing plans, however, look catastrophically weak. If realised, manufacturing investment in 2013/14 would be nearly 40% lower than the recent peak in 2011/12. Manufacturing weakness is counterbalanced to some extent by the rest of the non‑mining sector.
The ABS Survey does have some limitations when assessing the outlook for non‑mining capex. The RBA noted in the recent Statement on Monetary Policy, for example, that the capex survey excludes agriculture, health care & social assistance and education & training. Capital spending in these excluded industries has been robust. Over the three years to 2011/12 (latest available data):
- spending in those non‑mining sectors covered in the ABS capex survey fell by 8%; but
- spending in the excluded sectors rose by 21%.
Leading indicators on these excluded sectors are a little more encouraging. For example, non‑residential building approvals across agriculture, education, aged care and health are trending higher.
There is a pressing need to lift business capital spending outside of the resources sector. The available data shows how far the non‑mining sector has fallen behind in its capex task. The non‑mining capex share of GDP is at the lowest level since 1994 and the non‑mining capital stock as a share of GDP is at the lowest level since 1977. These requirements will eventually drive a lift in non‑mining capex. A pick up in demand and a recovery in business confidence would help.