Expected capex shocker

The ABS has released its all important capex expectations report and the news is not good. Mining is going to roll sharply and nothing is going to take its place. The headline results sums it up:

• This issue includes the seventh estimate (Estimate 7) for 2012-13 and the third estimate (Estimate 3) for 2013-14.
• Estimate 7 for 2012-13 is $160,450m. This is 3.6% higher than Estimate 7 for 2011-12. Estimate 7 is 1.4% lower than Estimate 6 for 2012-13.
• Estimate 3 for 2013-14 is $159,236m. This is 11.2% lower than Estimate 3 for 2012-13. Estimate 3 is 2.3% higher than Estimate 2 for 2013-14.

Here is the breakdown. First the headline chart:

Note that this is generally the peak estimate for the year so when we apply realisation ratios the result implies a total downdraft of about $10 billion to $150 in the year ahead, down roughly 6%. But if we’re using year on year comparisons the likely realisation outcome is much worse.

Looking at the components, the weakness is especially apparent in mining:

Estimate 7 for Mining for 2012-13 is $94,719 million. This is 15.5% higher than the corresponding estimate for 2011-12. Estimate 7 is 2.9% lower than Estimate 6 for 2012-13. Buildings and structures is 3.5% lower while equipment, plant and machinery is 0.4% higher than the corresponding sixth estimates for 2012-13.

Estimate 3 for Mining for 2013-14 is $102,843 million. This is 13.6% lower than the corresponding estimate for 2012-13. Estimate 3 is 1.3% higher than Estimate 2 for 2013-14. Buildings and structures is 1.4% higher and equipment, plant and machinery is 0.6% higher than the corresponding second estimates for 2013-14.

An averaging realisation ratio assessment implies a big downdraft. Year on year a huge one.

Manufacturing continues to be an unequivocal disaster:

Estimate 7 for Manufacturing for 2012-13 is $9,457 million. This is 28.5% lower than the corresponding estimate for 2011-12. Estimate 7 is 2.5% lower than Estimate 6 for 2012-13. Buildings and structures is 5.0% lower and equipment, plant and machinery is 1.3% lower than the corresponding sixth estimates for 2012-13.

Estimate 3 for Manufacturing for 2013-14 is $8,555 million. This is 25.0% lower than the corresponding estimate for 2012-13. Estimate 3 is 3.0% higher than Estimate 2 for 2013-14. Buildings and structures is 2.0% lower while equipment, plant and machinery is 6.0% higher than the corresponding second estimates for 2013-14.

I don’t even want to think about the reaslisation ratios here. It’s a wipeout.

Finally, Other Industries was also weak:

Estimate 7 for Other Selected Industries for 2012-13 is $56,274 million. This is 5.6% lower than the corresponding estimate for 2011-12. The main contributor to this decrease was Transport, Postal and Warehousing (-18.6%). Estimate 7 is 1.4% higher than Estimate 6 for 2012-13. Buildings and structures is 2.4% lower while equipment, plant and machinery is 3.8% higher than the corresponding sixth estimates for 2012-13.

Estimate 3 for Other Selected Industries for 2013-14 is $47,837 million. This is 2.1% lower than the corresponding estimate for 2012-13. The main contributor to this decrease was Wholesale Trade (-28.8%). Estimate 3 is 4.2% higher than Estimate 2 for 2013-14. Buildings and structures is 1.2% higher and equipment, plant and machinery is 6.9% higher than the corresponding second estimates for 2013-14.

There is nothing here to suggest housing or anything else is going to fill the mining hole in the next year. This report paints a broad based and very large downdraft in business investment. If we use average realisation ratios the decline is somewhere between $5 billion and $10 billion. If we use year on year comparisons it’s more like a fall of between $10 billion and $20 billion.

It is a shocker.