Australian business investment fell faster than expected last quarter with companies slashing spending plans in the face of the economic crisis, adding to the view that the country is in its first recession since 1991.
The slump in business expenditure was driven by the largest quarterly fall in plant and equipment spending since the survey began in 1987. This will feed into first-quarter GDP due out next week, which is likely to show a drop in the value of all goods and services produced.
The government said capital spending fell 8.9 percent in the first three months of this year to an inflation-adjusted A$22.96 billion (US$18 billion) and reversed the previous quarter’s surprise 7.3 percent rise.
Analysts had expected a fall of 7 percent, reflecting a collapse in business confidence, the commodity price slump and a sharp deterioration in global growth prospects.
“This is more confirmation that this is a business-led recession and we are deep in it right now,” said Robert Henderson, chief markets economist at National Australia Bank.
Australia’s economy shrank half a percent in the fourth quarter of last year and the Reserve Bank of Australia (RBA) believes it fell again in the first quarter.
First-quarter GDP is due next Wednesday and the report may show the country is in recession as per the usual definition of two quarters of contraction in a row.
Financial markets expect the RBA to keep rates unchanged at a record low of 3 percent next Tuesday. The central bank has said it will wait to assess the impact of monetary and fiscal stimulus in the pipeline.
“We expect the RBA to deliver a steady rate decision at next Tuesday’s board meeting despite the likelihood of a negative GDP print the next day,” said Su-Lin Ong, senior economist at RBC Capital.
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