Analysts at Australia and New Zealand Banking Group (ANZ) offer detailed insights on the Australian Q1 company operating profits data released earlier today.
Key Quotes:
“Company profits posted a modest headline rise (+1.7% q/q) in Q1, following an upwardly revised rise of 2.8% in Q4 (initially reported as +0.8%). After adjusting for inventory valuations, the result was a little better, with non-financial profits on a GDP basis rising 2.8% q/q.
Once again, profit growth was held up by the resources sector, with mining profits up a solid 5.2% q/q and 22% y/y. Non-mining profits actually fell in Q1 (-0.4% q/q), and are now up only 0.3% over the past year.
Growth in the wages bill was solid at +1.1% q/q, with the Q4 result revised up a touch to +0.9% (from an initially reported +0.8%).
Inventories were surprisingly strong (+0.7% q/q). While this is a positive for Q1 GDP, (adding 0.2ppt), rising inventories and disappointing sales are not a good combination for the outlook.
Together these numbers suggest some downside risk to our forecast for a rise of 0.6% q/q in Q1 GDP. We will finalise our estimate after the release tomorrow of net exports and government finance data.”
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