The easing of the Delta lockdowns saw Australian business conditions rebounding strongly, with inventories, sales, company profits and wages all lifting in the December quarter.
- Inventories rebounded by 1.1%q/q to $171bn after falling by 1.7% in Q3. This was well ahead of consensus for a flat outcome and lifted through the year growth from 0.6% to 2.2%.
- Company gross operating profits advanced by 2% in Q4 to $125.5bn to be up by 13% over the year.
- Wages and salaries more than offset Q3's 0.8% fall, surging by 1.9% to $155.6bn (5.5%Y/Y).
- Sales posted a reopening-driven 3.4% rebound, broadly reversing Q3's 3.5% contraction.
Business Indicators — Q4 | The details
Australian business conditions rebounded strongly from the Delta lockdowns in Q3. Eased restrictions, the rollout of the vaccine and stimulus measures were all key factors. Sales were resurgent rising by 3.4% supported by a recovery in discretionary spending, while inventories lifted by more than expected from very low levels.
Inventory levels were up 1.1% overall in the quarter. Wholesale (4.5%) and manufacturing (1%) were the key contributors, suggesting some improvement in global supply chain pressures, albeit with the latter still well below pre-pandemic levels. Both wholesale (4.6%) and manufacturing sales (0.8%) rebounded but fell short of reversing their declines in Q3.
Retail inventories contracted sharply (-2.3%), consistent with the rebound in household spending as the shops reopened. Retail sales surged by 5.7% in the quarter, more than reversing Q3's fall (-4.5%). Hospitality industries were setback in Q3 and remain in recovery mode despite conditions rebounding in Q4. Both inventories (-3.3%) and sales (-10.5%) remain well down on pre-pandemic levels.
Company profits were bolstered through the lockdowns by fiscal support (rising by 4% in Q3) and continued to advance as the affected states reopened (2% in Q4). This left aggregate company profits up 13% on a year ago. Adjusting for inventory valuation changes, company profits were up 2.7% in Q4, rising by almost 11% over the year. Non-mining sector profits drove the increase, surging by 9.1%q/q. Within the sector, the largest rises were in finance and insurance (77.3%), transport (26.6%), manufacturing (23.3%) and rental, hiring & real estate (19.2%). Mining sector profits weakened (-5.7%) with the iron price retracing from elevated levels.
Wages and salaries rebounded by a very strong 1.9% in the quarter, consistent with the recovery in the labour market as employment and hours worked snapped back above pre-pandemic levels. Wages in hospitality (15.8%) and arts & recreation (16.7%) rebounded with the reopening of affected states and eased restrictions.
Business Indicators — Q4 | Insights