Business investment in Australia had an unexpectedly large fall in the last three months of 2013, led by a big drop in mining related investment.
Capital expenditure (capex) was down 5.2 per cent in the December quarter, official figures show, worse than the one per cent fall the market was expecting.
Investment in equipment, plant and machinery was down 5.5 per cent in the quarter.
HSBC chief economist Paul Bloxham says the figures were weak and show the transition away from a booming mining sector was painful.
“There’s no denying that the transition from mining to non-mining growth is set to be challenging,” he said.
“But we think other parts of the economy will pick up pace more strongly and you are already seeing that in some of the timely indicators.”
Housing construction, the services and retail sectors and other areas sensitive to interest rates will eventually pick up the slack from a weakening mining sector, he said.
The closely watched capex figures, released by the Australian Bureau of Statistics, cover investment in capital goods which includes things as buildings and equipment.
Businesses collectively expect to invest $124.88 billion by the end of the 2014/15 financial year, which is 17.4 per cent lower than the first estimate for 2013/14, the ABS said.
“Everyone is looking for signs of activity outside of mining. There’s a faint heartbeat there but it’s not setting the world on fire,” RBC currency strategist Michael Turner said.
“Meanwhile, investment activity in the mining sector is slowing pretty quickly if these numbers are to be taken at face value.”
Mr Turner said the mining investment boom had well and truly peaked.
“Those signs have probably been around for a few quarters now, but this is one of the more timely indicators that suggest there will be a fairly reasonable contraction in 2014/15,” he said.
“It was always going to be a difficult transition.
“There are still reasonable signs outside of today’s data that suggest there is a bit of pickup outside of the mining industry.”
