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TDS: comments on Australia CapEx

Australia private capital expenditure indicator surprised investors on Thursday, raising by 4.0% in Q2, significantly surpassing the forecasted 0.5% growth and leaving behind the previous 4.1% contraction. 

However, TD Securities analysts are expressing doubts on whether this reading is truly positive for the Australian economy: “CAPEX was stronger than expected in Q2, but belies an actually quite weak report. In fact, the component that feeds into Q2 GDP—plant & equipment —fell for the third consecutive quarter (-1.2%), against our expectation for a small bounce. We have downgraded our Q2 GDP forecast from +0.6% to +0.4% (due Sep 4). The upshot is that today’s report keeps hopes of more RBA easing very much alive, though we continue to expect the regulator to leave the cash rate unchanged at 2.50% next week”.



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