Australia Q2 business investment sags

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    SYDNEY- Australian business investment surprisingly fell last quarter though companies upgraded spending plans for the year, sending a more positive signal for an economy that is otherwise faced with flagging confidence and global trade uncertainties.

    During the June quarter, investment fell 0.5 percent to A$29.23 billion ($19.74 billion), the figures from the Australian Bureau of Statistics (ABS) showed on Thursday. That confounded expectations for a 0.5 percent increase and piled on top of a 1.7 percent fall in the first quarter.

    However, spending on equipment, plant and machinery jumped 2.5 percent and will contribute to economic growth in the June quarter.

    Analysts were closely watching the spending outlook, which showed firms were more optimistic about the current year.

    “It was a slightly better survey than the headline number suggests,” said RBC economist Su-lin Ong.

    “The key component for capex that goes into GDP calculations was pretty decent. The 2.5 percent increase for the quarter is very encouraging,” she added.

    Figures due next week are likely to show Australia’s A$1.9 trillion annual gross domestic product (GDP) expanded anywhere between 0.2 percent and 0.5 percent in the quarter following an already pedestrian 0.4 percent the previous quarter.

    “In addition, spending plans for 2019/20 have been revised up. It’s still modest, a tad firmer than we’d been expecting given the weakness in business confidence recently.”

    The third estimate for 2019/20 came in at A$113.4 billion, nearly 15 percent higher than the second estimate for the year and was broadly in-line with expectations.

    The latest estimate for 2018/19 came in at A$122.1 billion, mostly unchanged from the previous estimate.

    The boost to spending plans come even as the outlook for business investment globally appears murky with the Sino-US trade war showing no signs of resolution. The uncertainty as to how the dispute will play out has prompted businesses to stay on the sidelines rather than invest.

    The indecisiveness is clear in manufacturing surveys from Germany to South Korea – countries heavily integrated in the global supply chain. – Reuters