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Capex to provide guidance for next week's Aus GDP - Westpac

FXStreet (Bali) - Sean Callow, FX Strategist at Westpac, shares his view on Australia's Q2 private capex survey, which will provide guidance on the GDP data due next Wed.

Key Quotes

"Australia’s Q2 private capex survey will provide guidance on the GDP data due next Wed and surely more relevant to the RBA outlook, an update on 2014/15 investment plans (11:30am Syd/9:30am Sing/HK). On the Q2 actual spending, Westpac’s forecast of -0.8% q/q total is near enough to consensus of -0.9% but the range of -4.2% to 3.1% is indicative of the risks of a surprise. We expect a sharp divergence between the key components: +1.5% on plant & equipment but -2% on buildings & structures. Of these, P&E has a much closer fit with the investment component of GDP so is the key to watch in terms of actual spending."

"But the RBA has already indicated that it does not expect a strong Q2 GDP reading and is more focused on Q3 and particularly 2015. In this regard, the third estimate of 2014/15 investment intentions is important, with the survey conducted in July and early August. Our central scenario is for a similar outcome to estimate 2, around $147bn. This would be about -6.5% y/y, with mining -19%, manufacturing -27% but services +15%. This would be a decent outcome that shouldn’t worry the RBA. A disappointing reading would be say $139bn, whereas an upside surprise could be more like $154bn."

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