Australian business investment unexpectedly fell last quarter as weakness in consumer-exposed sectors overshadowed strength in mining and manufacturing, suggesting the economy was not quite as hot as hoped. Yet Thursday's data also showed firms had markedly revised up their spending plans for the coming year, promising to cushion growth should a slowdown in the United States spread more widely.
"It's a soft headline but the outlook is very, very positive. It indicates spending in 2010/11 up 23 percent, which is a massive rise," said Helen Kevans, a senior economist at J.P. Morgan. The data showed private spending on building and equipment fell 4.0 percent to an inflation adjusted A$26.2 billion ($23.2 billion) in the second quarter, from the previous quarter.
That confounded forecasts of a 2.2 percent increase, with much of the weakness coming in sectors like retail which were exposed to subdued consumer spending. In contrast investment in the mining sector rose 2.6 percent in the quarter, while manufacturing spending jumped 16.5 percent.
Crucially, planned spending for the year to June 2011 was revised up sharply to A$123.3 billion, far above the A$110.8 billion expected by analysts. Private investment in everything from homes to mines to machinery accounts for around 23 percent of the country's A$1.2 trillion annual gross domestic product (GDP).
The Reserve Bank of Australia (RBA) has been doggedly upbeat despite gathering uncertainty over the global outlook, predicting gross domestic product (GDP) growth at home would accelerate to 3.25 percent this year and to 4 percent by 2012. That was one reason it has led the developed world by lifting its cash rate 150 basis points to 4.5 percent.
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