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28 Nov 2013
Flash: What happened to Australia's investment peak? - Nomura
FXstreet.com (Barcelona) - The Australian capex increased by a better-than-expected 3.6% q-o-q in Q3 2013 from a downwardly revised increase of 1.6% q-o-q in Q2 (from 4.0% q-o-q), with Charles St-Arnaud, Economist at Nomura, noting that "the increase in mining industry capex is surprising given the RBA has been saying the peak in investment has already occurred."
Key Quotes
"Overall, the report was better than expected and, with mining investment increasing on the quarter; it signals that the peak in mining investment may be delayed. However, capex expectations continue to show that investment by the mining sector should be weaker next year. The report also shows that that the contribution to growth from investment will be more positive in Q3 and could lead to stronger than expected growth."
"However, the expected decline in capex next year means that business investment should be a small drag to growth next year, in our opinion. Moreover, based on completion ratios for the past three years, we believe the fourth estimate suggests that
there are downside risks to investment expectations for 2013-14."
"The report does not change our view that capex will be a small drag on growth in coming quarters. However, the report will likely be well received by the RBA, as it shows that the drag on growth is likely to be smaller than it expected."
"We continue to believe that the RBA will maintain its policy rate at 2.5% until H1 2015, when we expect the first hike. In the OIS strip, the chance of a rate cut has been reduced slightly, with pricing of the terminal rate moving from 2.39% to 2.405% at the 14 May RBA meeting. The December RBA OIS pricing is at 2.491%, pricing in less than a 1bp cut."
Key Quotes
"Overall, the report was better than expected and, with mining investment increasing on the quarter; it signals that the peak in mining investment may be delayed. However, capex expectations continue to show that investment by the mining sector should be weaker next year. The report also shows that that the contribution to growth from investment will be more positive in Q3 and could lead to stronger than expected growth."
"However, the expected decline in capex next year means that business investment should be a small drag to growth next year, in our opinion. Moreover, based on completion ratios for the past three years, we believe the fourth estimate suggests that
there are downside risks to investment expectations for 2013-14."
"The report does not change our view that capex will be a small drag on growth in coming quarters. However, the report will likely be well received by the RBA, as it shows that the drag on growth is likely to be smaller than it expected."
"We continue to believe that the RBA will maintain its policy rate at 2.5% until H1 2015, when we expect the first hike. In the OIS strip, the chance of a rate cut has been reduced slightly, with pricing of the terminal rate moving from 2.39% to 2.405% at the 14 May RBA meeting. The December RBA OIS pricing is at 2.491%, pricing in less than a 1bp cut."