From Westpac:
The Business Indicators survey provides an estimate of business inventories and a partial update on incomes.
Inventory levels increased by a relatively solid 0.8%, exceeding expectations (mkt median & Westpac 0.3%).
This will see inventories add 0.2ppts to Q3 GDP growth. We had anticipated a neutral impact.
We suspect that some of this inventory run-up, which was centred on wholesale and to a lesser extent retail, was unintentional.
This was against the backdrop of patchy demand.
The debate is whether demand will regain momentum. We believe it will and note the rebound in retail sales in recent months.
See our GDP preview for more on this debate.
Company profits increased by 1.0% in the quarter, falling short of expectations (mkt median 3.0% and Westpac 1.8%).
Mining profits were largely as anticipated, +5.8%, boosted by higher commodity prices.
Profits across the broader economy were mixed, in aggregate edging 0.3% lower (ex mining & ex finance), adding to the evidence that conditions were soggy around mid-year.
We had anticipated a flat result on non-mining profits.
Wages and salaries (i.e. the wages bill) increased by a moderate 1.2% in the quarter but grew by only 2.9% over the year. Hours worked rebounded in the quarter, reversing the Q2 dip, supportive of wage incomes.
Unincorporated profits (i.e. small businesses) surprised to the downside, falling by 8.5% in the quarter. We suspect that the national accounts will be less negative than this.
Falls were in retail, real estate services, and professional business services.Implications for Q3 GDP
Our forecast for Q3 GDP remains 0.2%qtr, 2.4%yr.
We interpret today’s results as reducing some of the downside risks surrounding our central case forecast.
We now have convergence towards the 0.2% with our expenditure estimate of GDP (moving up towards 0.2% due to upside on inventories) and our income measure (moving down towards 0.2% due to downside on profits).
