Australian Business Profits Rebound Ahead of Q2 GDP
Australian business profits rebounded in Q2, led by mining, while weaker inventories provide a softer signal ahead of Wednesday’s GDP report.
Matt Simpson
- Currencies
Australian Business Profits Rebound Ahead of Q2 GDP
By: Matt Simpson, Market Analyst
Australian business indicators point to firmer activity in Q2, led by a rebound in mining profits and sales, although weaker inventories provide a softer signal ahead of Wednesday’s GDP report.
Australian Business Indicators Point to Firmer Q2 Activity
Australia’s latest business indicators point to a firmer end to the June quarter, although the details are not uniformly strong ahead of Wednesday’s Q2 GDP report.
Company gross operating profits rose 1.8% q/q, reversing a 1.5% decline in Q1. Mining did much of the heavy lifting, with mining company profits jumping 6.8% after falling 9.4% in the previous quarter, while mining sales rose 3.3%.
The sales figures were also broadly positive outside manufacturing. Wholesale sales increased 0.6%, retail sales rose 0.4%, while manufacturing sales dipped just 0.1%.
Wages and salaries increased another 1.4%, continuing a remarkably steady run of quarterly gains and providing another sign that nominal income growth remains firm.
Inventories Provide a Softer Note Ahead of GDP
Business inventories fell 0.24% q/q, despite wholesale and retail inventories rising 1.7% and 1.0% respectively. The drag came from mining inventories, which fell 4.8%, alongside a 0.9% decline for manufacturing.
That makes inventories one area to watch in Wednesday’s GDP report. They can make a meaningful contribution to quarterly growth, although the business indicators cannot be mapped directly onto the national accounts.
Taken together, the report points to firmer business activity in Q2, led by a rebound in mining profits and sales, while weaker inventories provide a counterweight ahead of Wednesday’s GDP report.
The quarter-on-quarter comparison highlights just how sharply the composition of growth shifted in Q2. Mining profits and sales rebounded strongly from Q1, while mining inventories swung from a sizeable build to a steep decline. Elsewhere, wages, wholesale inventories and retail inventories remained positive, reinforcing the broader picture of firmer activity with inventories providing the main offset.
- Currencies
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