SYDNEY, May 26 Reuters Australian business investment fell unexpectedly in the first quarter as floods and bottlenecks hit building work, though firms sharply lifted plans for spending in the year ahead in a boost to the economic outlook.

Data from the Australian Bureau of Statistics out on Thursday showed private capital spending dipped a real 0.9 in the March quarter, from the previous quarter, missing forecasts of a 1.5 increase.

Spending on buildings fell 1.7, offsetting a 1.2 rise in investment in plant and machinery which is important as this will directly contribute to economic growth in the quarter.

Promisingly, firms upgraded spending plans for the year to June 2023 to a strong A130.5 billion 92.49 billion, up almost 12 on the previous estimate and above the A122 billion analysts had looked for.

The report echoes data showing construction work done fell 0.9 in the first quarter as bad weather and supply shortages dragged on activity, particularly in housing where building costs rose at the fastest pace in 21 years.

All of which suggests some downside risk to gross domestic product GDP due next week where analyst forecasts had ranged from quarterly growth as low as 0.2 to as much as 1.0.

The main unknown is household spending on services, which could have been hit early in the quarter by a sudden outbreak of the Omicron variant of COVID19.

Retail sales did rise a solid 1.2 in the quarter to a record high A93 billion in real terms with consumers not yet…