Yesterday further confirmation from the Australian Bureau of Statistics (ABS) with the news that business capital spending rose just 0.6% in the September quarter, compared with the June quarter, when it rose a revised 7.4%.
The upward revision makes the size of the slowdown even more apparent.
No wonder the federal government has started about using up the budget surplus and lurching into deficit over the next year or two. It's a 'no-brainer', especially if you look at the way some retailers are strapping themselves in for a rough ride.
The decline in capital spending was triggered by a slowing of investment in manufacturing and in mining where investment in equipment, plant and machinery 10.1% drop in the September quarter, as global demand for commodities sagged.
But mining lifted spending on structures by 15% (so a lot of buildings, but not much in them?).
It's also interesting that the country's biggest retailer, Woolworths made it clear at its AGM yesterday that it would not be cutting its $1.9 billion capex plan for refurbishing more than 300 stores in the coming year.
That's good news.
In China the country's leading planner appeared in public for a rare news conference, cut estimates for growth for this quarter and warned that unemployment was rising and the slowdown was continuing.
The World's biggest steelmaker, ArcelorMittal revealed job cuts of 9,000 people across the group; it has already ordered a 30-35% production cut in some areas. Now it wants to cut costs by $US1 billion.
That means lower demand for Australian iron ore and coal.
With the slump in global demand accelerating, more bad news from future capex releases can be expected.
The figures for this quarter won't be released until late February when the slide in global demand for commodities and in the various national economies will be further advanced.
BHP Billiton CEO, Marius Kloppers gave a hint of what we could expect when he said at the company's AGM yesterday that the company saw "a decrease of 17 per cent year-on-year" in Chinese steel and "this will eventually flow through to all of us in the industry," he said.
We've seen that with Fortescue cutting back iron ore production, copper, nickel, zinc and lead mines shutting, cutting production and slashing work forces in WA, Queensland and NSW. A small Queensland miner, CopperCo went into administration yesterday.
Coal exports are also under pressure in NSW and Queensland and the queues of ships waiting to load at east coast coal ports have shrunk.
The ABS said there was also a noticeable easing in the growth rate for estimates of spending for the year to June 30, 2009.
The fourth estimate for the full year figure rose 1.6% to $102.675 billion; the first time the estimate this stage has cracked the $100 billion level.
But the ABS pointed out that this was a much smaller rise than in the previous two quarters. In the June quarter for instance estimate 3 was up 14.5% on estimate 2 which was issued in May.
Investment by manufacturing companies fell 0.7% in the September quarter.
Spending on buildings and structures rose 6.6% and company investment in new plant and equipment slid 2.4% in the quarter.
Overall, while there was a slowing in future spending plans, they remain very solid.
The third estimate in August for 2009 was up 26.2% on the same estimate in 2007 for this year. But this growth rate had slowed to 21.9% in estimate four (compared with estimate four last year), which was issued this morning.
The ABS said that the "seasonally adjusted September quarter estimate for Mining rose 7.1%. By asset class, buildings and structures continued to exhibit strength with a gain of 15.2% in the quarter compared to weakness in equipment, plant and machinery (-10.1%), in seasonally adjusted terms.
The capex figures are a bit at variance with Construction Work Done figures released Wednesday by the ABS which showed a rise in residential building completed (while building approvals fell 16%) and a higher engineering spending.
Looking forward the Bureau said its experimental projections showed "continued strength in the trend series for total capital expenditure and stable 2008-09 expectations reported in the quarter project the total capital expenditure series to approach the $30,000m expenditure per quarter level by the end of the 2008-09 financial year".
The cutbacks will feed through in 2009 forecasts for the federal government and Reserve Bank.
The RBA has been worried that business investment would start slowing after business lending staged a sharp slowdown from the start of the year as the economy cooled and the credit crunch hit.
With this sort of forecast it's no wonder Prime Minister Rudd and Treasurer Wayne Swan have swallowed their pride and admitted to the strong possibility of federal budget deficits.
Next Wednesday we get the September quarter GDP figures. June quarter growth was 0.3%, with consumption down 0.1%. Economists at Goldman Sachs JBWere yesterday morning repeated their forecast that:
"We continue to expect a 0.5% quarter on quarter fall in GDP in the September quarter which we believe will mark the commencement of a recession in Australia."
HSBC's Dr John Edwards told AAP that the figures were a bit better than the market had expected. He said the Reserve Bank of Australia would be reassured by the figures.
"You haven't yet seen a big downturn in expected business investment. I think that's quite critical and that will influence I think the Reserve Bank's view of 2009. It might be a little less gloomy than it otherwise might be."
Dr Edwards said the sharp fall from the June to September quarter meant Australia would be "doing well" to record positive growth when the latest gross domestic product (GDP) figures are published next week.
"I'm still expecting a positive number but it's not going to be very big," Dr Edwards said.
"There is a risk that we could get a negative quarter," he told AAP.
Meanwhile signs of life in October in the new home market, but it wasn't widespread or all that dramatic.
The Housing Industry Association said that new home sales rose last month thanks to the fall in interest rates and interest spurred by the increase in the first home buyer's grant.
But the improvement was patchy, with gains in Queensland and Victoria offset in part by falls reported in Western Australia and New South Wales.
The HIA said sales of new houses nationally grew by 6.7% last month. Total sales, including existing homes, rose 4.5% in October, but remained 6% lower for the August-October period.
HIA chief economist Harley Dale said the industry had a "long road" ahead before making up a series of falls for most of this year.
"But it is hoped that an improvement in new home sales in October could mark the beginning of a stabilisation followed by improvement in leading housing indicators over 2009," he said, in a statement.
Home sales in Queensland and Victoria led the nation, jumping by 24% and 20.3%, respectively in October, the HIA said. WA new home sales fell 12.9%, while NSW slumped 15% and South Australia was 0.5% higher.
Multi-unit sales dropped 8.6%, nationally, last month, continuing a trend where investors are not punting on an upturn in demand from the renters market, which seems odd given the way rents continue to remain firm.
