Economy: Boom, Boom

The resources boom powers on, according to the September quarter private investment data from the Australian Bureau of Statistics yesterday.

The figures show that business investment rose 12.3% in the September quarter, the biggest increase in more than four years.

Real capital expenditure in the quarter was $37.3 billion, seasonally adjusted, a record for a quarter.

It came after separate data last week from the ABS showed a 12.8% jump (the biggest on record) in construction work done in the quarter.

The median market forecast was for a rise of 8.0% in the quarter, a clear under-estimate from analysts.

Both are likely to contribute to a sharper rise in third quarter economic growth in next Wednesday's national accounts for the September quarter.

And, the latest estimate for business investment spending for the financial year ending June 2012 was $158.03 billion in current prices, with mining accounting for over half of that figure.

(It was the fourth of seven estimates for the financial year.)

The ABS said that was 26.9% higher than Estimate 4 for 2010-11 and 5.1% higher than the third estimate for 2011-12 issued three months ago.

These figures update those in the report Tuesday from the Bureau of Resource and Energy Economics which showed a 34% jump in investment in the six months to October.

The actual investment data in that survey was based on the June quarter private sector capex figures from the ABS.

While mining was the star in the ABS data yesterday, the performance of the manufacturing sector, supposedly beaten down by the impact of sluggish demand and the high dollar, was quite solid.

The trend series for manufacturing investment rose nearly 5.8% in the September quarter from the three months to June, to $3.53 billion.

That was due to a 7.7% lift in the investment in buildings and structures and a 4.5% boost in spending on plant and machinery.

The more volatile seasonally adjusted version of manufacturing investment was even better, up 9.8%, which is almost 'boom' like.

And the September quarter trend figure was 19% above the figure in the same quarter of 2010, and that's despite the impact of the strong dollar, restructurings and job losses at companies like BlueScope.

Looking to the coming year, manufacturing capex is expected to rise to $13.67 billion, 1.4% above the estimate in the June quarter.

That compares with spending of $12.34 billion in the 2010-11 financial year and $11.74 billion the year in 2009-10. That's an increase of 18% in the two years, at a time when the dollar rose more than 20%.

It's true that manufacturing's share of the investment boom and the wider economy is small in comparison with mining and resources, but it's not dying as some in the business world and trade unions would have you believe.

The ABS data shows that mining lifted its spending in the September quarter by 22.1%. Buildings and structures rose 27.1% and equipment, plant and machinery rose 5% in seasonally adjusted terms.

And the fourth estimate for the financial year for mining investment was $87.051 billion.

"This is 58.5% higher than the corresponding estimate for 2010-11. Estimate 4 is 3.5% higher than Estimate 3 for 2011-12. Buildings and structures is 3.1% higher and equipment, plant and machinery is 5.1% higher than the corresponding third estimates for 2011-12," the ABS said.

Other data out yesterday on house prices and lending showed the sluggish nature of some sectors.

Capital city house prices fell a further 0.5% in October and are now down 4% since the start of the year (both seasonally adjusted figures).

And RBA credit data for October showed a new record low (34 years of data) in annual growth in housing credit.

Personal credit also fell again while business credit remains weak.

Total loans in October rose 0.2% after a 0.5% rise in September.

Lending was up 3.5% from a year earlier.

Loans to consumers to buy houses rose 0.4% from September and were up 5.7% from a year earlier. That topped the earlier 34 year low set a couple of months ago.

Despite that, home lending is still the fastest growth area of lending for the banks and finance companies.

Credit provided to consumers for purchases other than housing fell 0.3% last month for an annual drop of 1.4% and lending to business was flat, and only up 0.7% on the same month last year.