Business Indicators — Q2 | By the numbers
- Inventories fell by their most on record -3.0% in Q2 to $157.9bn; much larger than the 1% decline forecast (prior -1.4%). The decline in annual terms extended from -2.4% to -4.7%, also its weakest pace on record, surpassing the low of the early 1990s recession.
- Company gross operating profits soared by 15.0% to $109.61bn in Q2, driven by government support measures, as the annual pace advanced from 1.8% to 11.3%.
- Wages and salaries posted their largest contraction on record falling by 3.3% in Q2 to $141.92bn, with the annual pace rolling over to -1.1% from 3.9%.
Business Indicators — Q2 | The details
Reflecting very weak demand conditions through the shutdown as well as disruptions in production, inventories contracted by 3.0% in the June quarter following on from a 1.4% pullback in Q1. Over the period, inventory volumes were reduced by 4.3% and by 4.7% through the year; the latter an outcome weaker than the low point from the nation's previous major economic downturn in the early 1990s, itself a very severe and protracted recession. The steepest declines in Q2 came through from accommodation and food services (-11.6%) and retail trade (-7.8%), sectors that were both significantly disrupted.
The June quarter was exceptionally tough for Australian firms as activity restrictions disrupted normal trading and economic uncertainty led to confidence collapsing. The fiscal support measures from the Federal Government for businesses and households have been significant and have helped to mitigate the full impact of the pandemic. As the restrictions started to be eased from mid May, a strong economic rebound was emerging before it started to show signs of stalling as virus-related concerns returned, most notably in Victoria.
Company gross profits showed a 15.0% rise in the June quarter to $109.61bn (11.3%yr), with the ABS reporting this was boosted by the receipt of subsidies from the Federal Government to offset the impact of trading disruptions from the activity restrictions. This accrued to non-mining companies, with gross profits across the sector surging up by 25.5% to $71.68bn (25.5%yr), as mining profits softened by 0.7% to $37.93bn, rolling over through year to -8.3% from 3.0%.
Reflecting the impact of the disruptions on companies across the economy, sales income was down heavily in all bar the utilities industry. Sales in the two industries most dirsputed by the activity restrictions plunged in Q2 with accommodation and food services -39.1% and arts and recreation -37.1%.
The wages and salaries measure collapsed by 3.3% in the June quarter in response to the activity restrictions leading to a large section of the workforce either being stood down or having their hours reduced. A proxy for the nation's wages bill, the level in the June quarter at $141.9bn fell to its lowest since Q1 2019.
Business Indicators — Q2 | Insights