Research Team at HSBC, notes that the Australian capital expenditure for Q4 2015 was a little stronger than expected at +0.8% q-o-q (market had -3.0%), but the details were weaker. Key Quotes “The machinery and equipment component, which feeds into GDP, was up by only 0.1% and, combined with a sharp decline in yesterday's engineering numbers (-9.5% q-o-q), suggests business investment will be a drag on growth in Q4 GDP. In addition, the forwardlooking parts of the capex survey were weak. The estimates for 2015/16 were largely unchanged but the first estimate for 2016/17 was below expectations. Mining investment is expected to continue declining rapidly and a further -7% drop in non-mining investment is expected in 2016/17. This survey has limited coverage of the services sectors, so may understate the outlook for growth. Nonetheless, there is no getting around the fact that the business investment outlook remains weak. Facts - The capex survey suggests that private capital expenditure rose by 0.8% q-o-q in Q4, better than the -3.0% decline expected by the market. Spending on buildings and structures was up 1.2% q-oq, while spending on machinery and equipment rose by 0.1%. - It is the latter number (machinery and equipment) that feeds into next week’s Q4 GDP release. Yesterday's construction data showed a -9.5% q-o-q drop in engineering construction, the other major component of business investment. - The capex survey also included an updated estimate (the fifth iteration) of spending for 2015/16, which was very similar to the previous iteration, showing a -34% decline in mining investment and a -6% drop in non-mining investment for the current financial year. - We also got the first estimate of capex intentions for the 2016/17 year. This was weaker than expected at A$82.6bn (market had A$93bn, HSBC expected A$85bn). Relative to this year, the numbers imply a further -35% drop in mining investment and a -7% fall in non-mining investment.” For more information, read our latest forex news.