Private business spending jumped unexpectedly last quarter

Australia:

Private business spending rose by a solid 3.6% in the September quarter, stronger than expected. There were also some encouraging signs in the detail.

Taken with construction work done data released on Wednesday, business investment will likely make a larger contribution to growth in Q3 than what we previously thought.

We received the fourth estimate for investment plans by firms for 2013-14.  We estimate a modest 1.0% increase in capital expenditure 2013-14 (using realisation ratios).

The planned expenditure for mining investment suggests that the peak was likely in 2012-13, but that that the decline over 2013-14 will be modest.

There were upgrades to investment for manufacturing and other selected industries, which was a positive sign.

Additionally, both sectors saw an increase in spending for the quarter. While investment in non-mining remains soft, particularly within manufacturing, there are some encouraging signs that the outlook for non-mining investment is improving.

Share Markets:

With the US on holiday, attention was on events in Europe. European shares were slightly higher, rising 0.3%, bolstered by an improvement in economic and business sentiment. German inflation was also higher than expected. 

Bonds: 

Bond yields in Europe rose after German inflation accelerated, lessening the likelihood the ECB would take further steps to ease monetary policy.

While the US treasury market was closed, futures on US treasuries traded in a tight range, as were bond futures in Australia. 

Foreign Exchange:

The euro rose against the US dollar, as preliminary readings on inflation for the region beat expectations, although it was relatively unchanged against the Australian dollar. 

The pound also lifted, gaining support from a surprise announcement by the BoE to withdraw support for the housing market.

The Australian dollar rose after the surprisingly strong business investment data, which supported the case that the RBA may be done cutting rates. It rose to an intraday high of 0.9149 before paring some gains later in the session.

Commodities:

Brent oil prices fell weighed down by higher than expected stockpiles in the US. Copper prices and gold prices rose, helped by a weaker US dollar although trading was light due to the US holiday.

China:

Industrial profits rose 15.1% in the ten months to October over the same period on a year ago. Profits in private businesses drove growth over the period rising 17.5%, while State-run firms grew 9.1%. 

Europe:

Eurozone M3 money supply growth slowed from 2.0% in the year to September to 1.4% in the year to October.
In other data, the business climate index improved from -0.1 to +0.1 in November.

Economic confidence also improved, from 97.7 to 98.5 in November. Both indices are back at levels last seen in 2011.

German unemployment rose 10k in November for a steady 6.9% jobless rate. Inflation edged up from 1.2% in the year to October to 1.3% in the year to November.

Japan:

Retail trade fell 1.0% in October. However, the drop followed a revised 1.7% gain in September. The annual rate of growth stepped down from 3.0% to 2.3%. 

New Zealand:

Business confidence rose from 53.2 to 60.5 in November according to ANZ, the highest since 1999. It points to a net 60.5% of respondents which expect the economy to improve in the year ahead.

The optimism corresponds with the view that the New Zealand economy is gaining momentum.

United Kingdom:

The Bank of England (BoE) has announced it will remove incentives to boost housing from 2014, a year earlier than scheduled.

The funding for lending scheme will cease to provide cheap funding for mortgages (business loans still will be funded this way) and banks will no longer be exempt from holding capital against mortgages.

United States:

No data due to Thanksgiving holiday.


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