-Stephen Walters, JP Morgan's chief economist
We have observed an inflow of upbeat data from the Oz economy, including stronger employment, trade balance as well as first quarter's GDP in the recent weeks. All these reports forced the RBA to distance from its dovish view and turn to a neutral or even slightly hawkish bias, provoking a rally in the Aussie. Investors and companies, however, were not very convinced by all these optimistic signs.
A report from the Bureau of Statistics showed business investment, or the so-called capital expenditure, plunged 4.2% in the March quarter, missing analysts' expectations for a 1.6% drop, staying around previous quarter's revised reading. As it was expected, mining sector led the decline in building and structures investment, logging a 10% drop over the period. At the same time, manufacturing sank as well, and even a $113 million gain in other selected industries was not able to offset the overall trend.
Nevertheless, there were some promising facts, with investment in new equipment rising 2.8% to $12.6 billion, meaning companies are not building new structures, but still purchasing new equipment. Despite another decline, analysts believe the future outlook will be more positive that they had feared earlier. Additionally, the Aussie reacted in a positive way, adding 0.27% versus the greenback, trading around 0.9260.
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