Find below a useful summary from Westpac of today’s Business Indicators release by the Australian Bureau of Statistics, which provides an estimate of business inventories and a partial update on incomes.
Of particular importance to the March quarter’s GDP result, to be released on Wednesday, is the 1.7% seasonally-adjusted (1.0% trend) decline in inventories, which is expected to drag down GDP by almost 0.5%. This has meant that Westpac’s forecast for Q1 GDP is now skewed to the downside – a change from this morning’s more bullish forecast:
Our forecast for Q1 GDP remains 0.9%qtr, 3.2%yr, with risks now tilted a little to the downside.
Public demand and net exports data to be released tomorrow will provide further guidance on the risks surrounding our forecast.
The level of business inventories declined at a faster rate than anticipated. Down 1.7%, inventories will subtract almost 0.5ppts off Q1 GDP growth. We expected a decline of 0.5%, with a neutral impact. The inventory rundown in the quarter was led by mining, which achieved strong export sales, and manufacturing.
Company profits exceeded market expectations, but fell short of our forecast – with an outcome of +3.1% vs market median 2.5% and Westpac f/c 4.6%. Mining profits advanced relatively strongly, up 4.2%, although we expected a figure in excess of 5%. Profits across the broader economy increased by 2.5%.
Adjusting for inventory valuations, as occurs in the national accounts, the rise in profits is trimmed from 3.1% to 1%. We anticipated a figure of 3% on this basis.
Wages and salaries (i.e. the wages bill) increased by 0.2%qtr, 2.9%yr in Q1. That soft result of 0.2%qtr follows a 1.2% rise in Q4. Fluctuations in redundancy repayments, which are included in this wage series and in the national accounts measure, may be distorting the quarterly profile of wage income growth.
Unincorporated (i.e. small business) profits jumped 8.5% in the quarter to be 0.4% lower than a year ago.
