Business indicators soft

ABS Business Indicators are out this morning and show an economy in the doldrums in the December quarter+

DECEMBER KEY FIGURES

Sep Qtr 11 to Dec Qtr 11
Dec Qtr 10 to Dec Qtr 11
%
%

Sales of goods and services (Chain volume measures)
Manufacturing
Trend
0.7
1.6
Seasonally Adjusted
-0.2
0.9
Wholesale trade
Trend
1.9
6.5
Seasonally Adjusted
2.0
6.9
Inventories (Chain volume measures)
Trend
0.6
2.2
Seasonally Adjusted
1.4
2.4
Company gross operating profits
Trend
-0.1
5.3
Seasonally Adjusted
-6.5
2.2
Wages and salaries
Seasonally Adjusted
0.8
6.9

So, profits took a beating, salaries climbed and so did inventories. That looks about all square for tomrrow’s GDP release, though it’s a notoriously difficult measure to forecast. I’m wondering, though, about the inventory build, which is very strong. It’s either the result of weaker than expected demand, or an expected bounce in demand perhaps on the November and December rate cuts. Given the nasty profit result, you’d have to put your money on the former. Either way, it doesn’t bode well for March QTR GDP.

Anyways, here are a couple of charts on sectoral profit performance. Mining is down, I imagine on the terms of trade correction:

And here are the other major sectors:

That’s pretty patchy all around on the quarter

Comments

  1. You need to look at the inventory data on a sector by sector basis. The biggest sectors in the data are Wholesale, then Manufacturing, then Retail, then Mining.
    .
    The former 3 sectors have gone through various bouts of inventory draw down and inventory build up since the GFC hit and passed (sic). If you look at the sales ratio you would see why. The biggest cyclicality has been in the Mining sector inventories. I am no expert on this, but you could hazard a guess about the lumpiness, expense and dealay in some of the equipment involved in that sector. I have not looked at todays data in detail but would not be surprised to see Mining was the key driver of inventories increasing.

    • OK, so I went and checked this. Realised I last looked at it February 2011. Wholesale trade is 36% on chain volume measure. Manufacturing 32%, Retail Trade 22%, Mining 7%. (the other 2% is Accommodation and Utilities).
      .
      On a Dec11/Dec10 basis Mining is up 17%, Wholesale 3.8%, Retail 1.8%, Manufacturing -1.5%.
      .
      For the quarter, Retail 2.7%. Mining 2.2%, Wholesale 1.8%, Manufacturing 0.1%.
      .
      So, remembering those weightings, the majority of build up this quarter came from retail and wholesale, then mining, manf doing nothing.

    • Major flooding closing mines in Qld would also have helped run down stocks held outside the mining area eg at coal loaders.

  2. Honestly, rising salaries in a context of decreasing profits warrants a “ummm, what are you doing….?!”

    This can’t keep happening. Financial managers and/or shareholders will start demanding cost reduction – and soon, if they are not already in the pipeline.

    Thoughts?