Given the medium-term investment plans of the mining sector and considering the relentless declines in both iron ore and coal prices in the latter part of 2014, a further sharp decline in mining investment looks almost inevitable. “We expect cutbacks similar to those of Q4 (around 5% qoq). Following an unexpected bounce in manufacturing investment in Q4, a pullback looks likely in Q1 in this sector as well”,says Societe Generale.However, ‘other sectors’ – which means mostly services – are expected to have further increased their investment activity, encouraged by strengthening domestic consumer demand and the decline in the exchange rate. But arguably what is more important will be the quarterly survey of investment plans – and especially the plans in ‘other sectors’. The Q4 survey shocked with a decline in the first estimate for FY 2015/16 of 1.8% versus the first estimate for FY 2014/15. This is of critical importance to the outlook for the overall economy, as non-mining investment is one of the key areas that have the potential to provide a serious counter to the resource investment downturn. The RBA, in particular, has become quite cautious about this handover. “We expect a notable increase in these plans. In mining, we expect investment plans to continue to head lower, albeit at a fairly steady rate of around 20%”, added Societe Generale.
The material has been provided by InstaForex Company – www.instaforex.com