Business Indicators — Q1 | By the numbers
- Inventories increased by 0.7% in Q1 to $162.5bn -- the median forecast was for a flat outcome (prior 0.0%). Through the year, inventories lifted from 1.1% to 1.4%.
- Company gross operating profits lifted by 1.7% in Q1 to $90.03bn, lower than the forecast for 2.8%, easing the annual pace from 10.5% to 7.8%.
- Growth in wages and salaries lifted by 1.1% in the quarter (prior 0.9%) as the annual pace lifted from 4.0% to 4.4%.
Business Indicators — Q1 | The details
Australian businesses increased inventories by 0.7% over the March quarter after a flat outcome in Q4. The profile has been volatile over the past 4 quarters, but the annual pace remains subdued at 1.4%, though it did increase from 1.1%. For the March quarter, inventories lifted in mining (2.3%), manufacturing (1.4%) and retail (1.9%), while there were declines in utilities (-11.5%), wholesale trade (-0.6%) and accommodation and food services (-3.2%). The increase from the mining sector follows declines in the previous two quarters due to supply disruptions caused by adverse weather conditions.
Gross company profits posted a 1.7% rise in the quarter, though growth over the year eased down to 7.8%. These outcomes were below expectations and slower than in the December quarter at 2.8%q/q and 10.5%Y/Y. Profitability continues to be led by the mining sector on the back of surging commodity prices, rising by a further 5.2% in the quarter to be 21.6% higher over the year. This contrasts with a subdued non-mining sector in which profitability was broadly flat in the quarter. There were increases for; utilities (1.8%), wholesale trade (2.8%), retail (0.1%), transport (3.8%), media and telecommunications (5.0%), finance (7.6%), professional services (5.0%) and administration (13.6%). Declines were recorded in; manufacturing (-1.5%), construction (-7.5%), accommodation and food services (-3.8%), real estate (-10.0%) and recreation (-15.5%).
The outcome for wages and salaries, which flows through to the key Compensation of Employees figure in the National Accounts, lifted by another 1.1% in the quarter to $141.26bn elevating the annual increase from 4.0% to 4.4%. The ABS' labour force data indicated that employment growth lifted by 0.6% in Q1 and 2.4% for the year, while hours worked were up by 0.9% in the quarter and around 2.9% year-on-year. The pace of wages growth, however, still remains slow.
Business Indicators — Q1 | Insights
Looking towards Wednesday's National Accounts, inventories appear likely to add modestly to output in the quarter after contributing 0.2ppt in Q4. The company profits component is split by strength in mining, which will flow through to increased federal tax revenues, against a subdued non-mining sector that is broadly reflective of soft domestic demand. The lift in wages and salaries continues to reflect the strength in employment growth, with a better contribution this quarter from hours worked.