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26 Feb 2015
Australia's capex eyed - Westpac
FXStreet (Bali) - Sean Callow, FX Strategist at Westpac, shares the bank's view ont he upcoming key events for Thursday, including Australia’s actual private capital expenditure (capex) for Q4.
Key Quotes
At 11:30am Syd/8:30am Sing/HK we see data on Australia’s actual private capital expenditure (capex) for Q4, along with updated surveys of investment intentions. Both will be noted with interest by the RBA ahead of Tue’s Board meeting. We look for Q4 capex to have fallen -2.2% q/q, with buildings & structures to be around -3% lower, weighed by the cyclical downswing in mining investment. Plant & equipment spending rose 7% in Q1-Q3 2014 so seems due for a decline; we look for -1.2%. AUD is likely to respond to any notable divergence from the -1.6% median forecast, with potential for economists to adjust their Q4 GDP forecasts (due Wed).
Probably more important for the RBA is the update on investment plans. This survey was conducted Jan-Feb and provides an update on 2014/15 (year to June) as well as the first reading on 2015/16. Estimate 4 of 2014/15 was A$153bn, -8% y/y. An annual fall is virtually a given as historically huge mining investment declines. Another reading around $153bn would be a pretty good outcome, with a 9% y/y rise in services investment (transport, finance, retailing etc) providing an offset to -16% on mining, -14% on manufacturing. Given softer business confidence in recent months, the risks seem to be for a softer reading, say $148bn. On the upside, $158bn would be a very encouraging result.
There is even greater uncertainty over the first estimate of 2015/16 and markets should not place much weight on such an early reading. But for what it’s worth, we would regard $123bn as a robust result, with risks tilted to a print below this. $123bn would be -2% y/y versus estimate 1 of 2014/15 i.e. resilient. An MNI survey found a median forecast of $153bn and $120bn respectively.
In Europe, German Feb unemployment rate is expected to remain unchanged at 6.5%, while unemployment falls 10k. The second estimate of UK Q4 GDP will be released. A revision to the 0.5% headline is unlikely, but the breakdown will be watched.
US Jan CPI should be weighed by the continued decline in oil prices and the impact of the stronger US dollar on import prices. The market expects -0.6%m/m headline and 0.1% core. A weak number may chip away further at the USD, though CPI is not as market sensitive as the PCE deflator. Jan durable goods orders should see a bounce to 1.6% from -3.3%, with risks to the upside, partially reversing weakness from late 2014. We will also see initial jobless claims numbers.
Key Quotes
At 11:30am Syd/8:30am Sing/HK we see data on Australia’s actual private capital expenditure (capex) for Q4, along with updated surveys of investment intentions. Both will be noted with interest by the RBA ahead of Tue’s Board meeting. We look for Q4 capex to have fallen -2.2% q/q, with buildings & structures to be around -3% lower, weighed by the cyclical downswing in mining investment. Plant & equipment spending rose 7% in Q1-Q3 2014 so seems due for a decline; we look for -1.2%. AUD is likely to respond to any notable divergence from the -1.6% median forecast, with potential for economists to adjust their Q4 GDP forecasts (due Wed).
Probably more important for the RBA is the update on investment plans. This survey was conducted Jan-Feb and provides an update on 2014/15 (year to June) as well as the first reading on 2015/16. Estimate 4 of 2014/15 was A$153bn, -8% y/y. An annual fall is virtually a given as historically huge mining investment declines. Another reading around $153bn would be a pretty good outcome, with a 9% y/y rise in services investment (transport, finance, retailing etc) providing an offset to -16% on mining, -14% on manufacturing. Given softer business confidence in recent months, the risks seem to be for a softer reading, say $148bn. On the upside, $158bn would be a very encouraging result.
There is even greater uncertainty over the first estimate of 2015/16 and markets should not place much weight on such an early reading. But for what it’s worth, we would regard $123bn as a robust result, with risks tilted to a print below this. $123bn would be -2% y/y versus estimate 1 of 2014/15 i.e. resilient. An MNI survey found a median forecast of $153bn and $120bn respectively.
In Europe, German Feb unemployment rate is expected to remain unchanged at 6.5%, while unemployment falls 10k. The second estimate of UK Q4 GDP will be released. A revision to the 0.5% headline is unlikely, but the breakdown will be watched.
US Jan CPI should be weighed by the continued decline in oil prices and the impact of the stronger US dollar on import prices. The market expects -0.6%m/m headline and 0.1% core. A weak number may chip away further at the USD, though CPI is not as market sensitive as the PCE deflator. Jan durable goods orders should see a bounce to 1.6% from -3.3%, with risks to the upside, partially reversing weakness from late 2014. We will also see initial jobless claims numbers.