Australia: Disappointing Q4 profits, inventories and wages data – ANZ

Felicity Emmett, senior economist at ANZ, notes that the Australia’s Q4 business indicators data were weaker than anticipated, with profits, inventories and wages all below their forecasts. 

Key Quotes

“Together, these numbers provide a downside risk to our forecast for a 0.2% q/q rise in Q4 GDP, due on Wednesday, and raise the prospect that GDP could print negative in the quarter.”

“Company profits posted a modest headline rise (+0.8% q/q) in Q4, following a downwardly revised rise of 1.2% in Q3 (initially reported as +1.9%). After adjusting for inventory valuations the result was a little better, with non-financial profits on a GDP basis rising 1.8% q/q.”

“Growth in the wages bill was lower than we expected at 0.8% q/q, but the Q3 result was revised up. With the rise driven largely by gains in employment, the GDP measure of average wages is once again set to be weak.”

“Inventories were surprisingly weak (-0.2% q/q), which suggests that private non-farm stocks will make no contribution to GDP growth in Q4, weaker than our expectations.”

“Today’s numbers suggest downside risk to our forecast for a rise of 0.2% q/q in Q4 GDP. We will finalise our estimate after the release tomorrow of net exports and government finance data.”