Businesses have put the brakes on investment, pointing to an even sharper than expected economic slowdown.

Key points: Business investment fell sharply in the first quarter, retreating from the gains made late last year

Business investment fell sharply in the first quarter, retreating from the gains made late last year Coupled with construction activity, the weak capex data is expected to shown the economy has almost stalled

Coupled with construction activity, the weak capex data is expected to shown the economy has almost stalled Forward looking building approvals fell sharply in April and are down more than 20pc on a year ago

In seasonally adjusted terms, business investment tumbled 1.7 per cent in the first three months of the year.

The consensus forecast was for a marginal increase in capital expenditure.

The weaker than expected result comes on top of disappointing first quarter construction data and point to a very weak reading of GDP growth to be released by the ABS next week.

Investment in the key sectors of building and structures as well as equipment, plant and machinery contracted 2.8 per cent and 0.5 per cent respectively.

Manufacturing investment was particularly sour, down 7.4 per cent over the quarter, however the mining capex collapse looks like it may have bottomed out, with investment in the sector down a comparatively modest 1.3 per cent.

Citi economist Josh Williamson said a second successive quarter of falling investment in the manufacturing sector was a concern.

"We would have preferred to see stable to slightly higher manufacturing activity given this sector's previous large structural adjustment following the loss of the automotive sector that had imparted a survivor bias to remaining industries," Mr Williamson said.

Mr Williamson said he had pencilled-in a "soft" 0.4 per cent GDP growth result for the first quarter.

"It would also drag yearly GDP growth from 2.3 per cent to an optically poor 1.7 per cent and the slowest since the third quarter of 2009."

The only bright point in the Australian Bureau of Statistics survey was a slightly stronger than expected rise in investment expectations.

Business now expects to spend $99.1 billion in the 2019-20 financial year, a 12.8 per cent lift on last year.

Mr Williamson said the weak investment outcome would not matter to the Reserve Bank given a decision to cut interest rates next week was probably already locked in.

"But the GDP data will be important, particularly the result for household consumption and disposable income. For the RBA this is where the greatest uncertainty lies with respect to the activity outlook."

Residential construction bust continues

There was also disappointing news for the residential construction sector.

While housing approvals are generally volatile, permits issued in April fell by a sharper than expected 4.7 per cent.

Over the year, total dwelling approvals are down more than 24 per cent.

Approvals for houses were down 2.8 per cent for the month and 20.5 per cent on last year.

The rapid slowdown in the apartment sector continued. Apartment approvals fell another 6.5 per cent and are down almost 30 per cent on a year ago.

The ongoing slide in approvals and lending is putting considerable pressure on jobs in the residential sector.

"Approvals are at their lowest level since June 2013," Indeed economist Callam Pickering said.

"Data suggests that construction activity and employment is likely to ease over the next 12-to-18 months."