* Private new capital expenditure falls more than expected in Q1
* Spending by miners and manufacturers drop sharply
* Investment plans for next fiscal year upgraded, offers hope
By Ian Chua
SYDNEY, May 26 (Reuters) - Australian business investment fell last quarter, severely dragged by the battered mining sector, but a modest upgrade to overall spending plans helped take the sting out of a disappointing report.
Figures from the Australian Bureau of Statistics on Thursday showed total private new investment fell 5.2 percent in the first quarter to an inflation-adjusted A$30.6 billion ($22.0 billion), although analysts had forecast a smaller 3.0 percent drop.
"Overall, these figures support our view that investment is going to remain the weak spot of the Australian economy for some time yet," said Paul Dales, Australia & New Zealand economist at Capital Economics.
Mining investment suffered a 12.0 percent drop as the boost from a once-in-a-lifetime mining boom continued to unwind. Manufacturing fared no better, falling 10.3 percent.
Promisingly, investment by "other selected industries" including services rose 1.8 percent.
Analysts were also pleased to see a slight upgrade to overall spending plans for the year ending June 2017 to A$89.2 billion, from A$84.0 billion initially, thanks again to the "other selected industries" category.
"The emergence of a sustained upswing in investment by the service sectors is a key element in the economy's successful transition from growth led by mining investment to strength across the broader economy," said Andrew Hanlan, senior economist at Westpac.
"Investment intentions of the service sectors will be of particular interest to policymakers, including the RBA."
While the survey does not cover a large chunk of the services sector, such as education and healthcare, it does provide a general guide to business spending plans.
There was little reaction to the mixed report with the
Australian dollar dipping to $0.7162 AUD=D4 , from $0.7180.
A decade of madcap expansion saw mining investment quadruple to reach 8 percent of Australia's A$1.6 trillion annual gross domestic product (GDP). Now, it's heading rapidly back to around 3 percent.
GDP figures due next week are generally expected to show the economy grew a modest 0.6 percent last quarter, the same pace as the fourth quarter. ($1 = A$1.39)