Business Indicators — Q4 | By the numbers
- Inventories declined by -0.2% in Q4 to $161.23bn, with the market looking for a rise of 0.3% (prior rev -0.1% from 0.0%)
- Company gross operating profits increased by 0.8% in Q4 to $90.06bn, while the annual pace of growth slowed to +10.5% from +12.3%.
- Wages and salaries lifted by 0.8% in Q4 to $139.66bn, with annual growth easing from +4.3% to +4.1%.
Business Indicators — Q4 | The details
Starting with inventories, the overall level held by firms eased by 0.2% over the December quarter and follows a downwardly revised decline (-0.1%) from Q3. Across the year, growth in inventories slowed to a modest +1.0% from the +1.5% pace in the previous quarter. Firms will typically look to build inventories in response to rising domestic demand. The detail in Q4 was; mining -2.8%, manufacturing -0.8%, utilities -0.5%, wholesale trade +0.4%, retail trade +0.4% and accommodation and food services +6.9%.
Gross company profits were up by a modest 0.8% over the quarter and by 10.5% over the year to $90.06bn. These outcomes were a step down from the previous quarter at +1.2%q/q and +12.3%Y/Y. This component flows through to the estimate for non-financial corporate profits in the National Accounts.
Profitability continues to rise strongly in the mining sector due to surging commodity prices. Mining sector profits lifted by another 4% in the quarter to be up by 26.3% from a year earlier. Wednesday's National Accounts should confirm a solid rise in the terms of trade in Q4.
Looking at the non-mining sectors in aggregate, profitability in Q4 looked to be soft at -1%q/q (+2.5%Y/Y). Within this, there were increases for; utilities (+3.7%), construction (+1.6%), accommodation and food services (+10%), transport (+8.2%), professional services (+6.7%) and 'other' services (+2.5%). This was offset by declines for; manufacturing (-3.6%), wholesale trade (-3.4%), retail trade (-0.8%), media and telecommunications (-7.8%), financial and insurance services (-26.6%), real estate services (-1.3%), administration (-13.8%) and arts and recreation (-5.1%).
The wages and salaries component is the primary estimate for the key Compensation of Employees number in the National Accounts. Wages and salaries lifted by 0.8% in the quarter to $139.66bn (+4.1%Y/Y). This figure reflects growth in hours worked and wages. Available data from the ABS had indicated that hours worked lifted only modestly over 2018, while wages continued a very gradual uptrend.
Business Indicators — Q4 | Insights
Today's inputs are another soft lead towards Wednesday's Q4 GDP growth figures. Inventories could be flat to slightly negative. The income components from company profits and wages and salaries were also softer than anticipated. The partial indicators already released from retail sales, construction work done and capital expenditure have been consistent with soft activity over Q4. The final inputs will be released tomorrow for net exports and government spending.
