UPDATE 1-Australia business investment up in Q2, slowdown ahead
* Investment rises 4 pct in Q2 thanks to mining, beats forecasts * Latest estimate for 2013/14 spending nudged up to A$159.2 bln * Onus still on non-mining sectors to take up the slack By Wayne Cole SYDNEY, Aug 29 (Reuters) - Australian business investment was surprisingly strong last quarter as spending by miners more than offset a slump in manufacturing, though plans for the year ahead suggested investment was set to slow from here. Thursday's data from the Australian Bureau of Statistics showed capital spending climbed 4 percent in the second quarter to an inflation-adjusted A$40 billion ($35.8 billion), topping forecasts of a 1 percent increase. Mining again led the way with a 6.4 percent jump in spending, the best result in a year and a reminder the resource boom was not quite dead yet. Still, the best of the bonanza did look to have passed. "We still think resource investment is going to peak in the second half of 2013 and from thereafter it will be a drag on overall economic growth," said Tom Kennedy, an economist at JPMorgan. "So we still do need some sectors of the economy to step up and fill that void." So far, however, the response has been disappointing with some firms blaming political uncertainty ahead of a Federal election on Sept. 7 for a reluctance to invest. The Reserve Bank of Australia (RBA) has done what it can to try and revive businesses' animal spirits by cutting interest rates to a record low of 2.5 percent earlier this month. If non-mining investment does not start to pick up soon, it could well have to ease again. The central bank's next policy meeting is on Sept. 3 but a move is considered highly unlikely so close to the election. Futures markets <0#YIB:> imply around a 56 percent chance of a cut in November, rising to 80 percent by Christmas. FUTURE PLANS One soft spot in Thursday's numbers was a 1.6 percent drop in spending on plant and machinery in the second quarter, which could have dragged on economic growth. Gross domestic product (GDP) are due next week and a poor number would be a blow to Prime Minister Kevin Rudd just days before he faces voters on Sept. 7. Opinion polls already suggest the Labor government will be handily beaten by the Liberal National coalition. Looking further ahead, firms nudged up their spending plans for the financial year to end June 2014 to a total A$159.2 billion, from a previous A$155.7 billion. Deloitte Access Economics estimates there were a still massive A$452 billion ($405 billion) of investment projects underway or committed at the end of March. But another A$477 billion-worth were up in the air, with mining vulnerable to a slowdown in China and softer commodity prices. Analysts have taken some heart in recent signs of stabilization in China, easily Australia's largest export market. Prices for some key resources have also swung higher. Iron ore is Australia's single biggest export earner and spot prices have climbed 25 percent in the past three months to $138.70 a tonne. The gain is even bigger for local miners since the Australian dollar has fallen in the same period. Measured in the local currency, iron ore prices have surged 34 percent since early June to A$154 a tonne, a major windfall for profits, dividends and tax receipts. (Editing by Eric Meijer)
- North Korea says Kim's powerful uncle dismissed for 'criminal acts'
- Protesters fell Lenin statue, tell Ukraine's president 'you're next'
- Thai PM calls snap election, protesters press on
- Singapore hit by rare outbreak of rioting, 27 arrested |
- Billy Joel, Shirley MacLaine feted at Kennedy Center Honors