Australia: Business Indicators survey points to softer tone at year end - Westpac

Andrew Hanlan, Research Analyst at Westpac, suggests that Australian business indicators survey point towards a softer tone at year end as Q4 wage incomes surged by 1.0%qtr and 4.3%yr.

Key Quotes

“The Business Indicators survey provides an estimate of business inventories and partial information on incomes.”

“This points to some downside risks to our Q4 GDP forecast of 0.5%. On Tuesday, we receive updates on net exports and public demand.”

“Company profits rose by 2.2% in Q4, which was weaker than we anticipated (4.0%) but a little above market expectations (market median 1.5%).”

“By industry for Q4, mining profits increased by 4.2%, boosted by higher commodity prices.”

“Non-mining profits ex finance increased by 1.2% in the quarter, but were mixed across industries. Strength was evident in the consumer sectors (retail and hospitality) as spending rebounded from a weak Q3, as well as in wholesale.”

“Critically, profits on an adjusted basis fell by around 2.0%, we estimate, whereas we anticipated a rise of 1.3%.”

“Nominal wage incomes (that is, wages and employment) increased by 1.0% in the quarter, broadly meeting our expectations.”

“Key to the lift in wage incomes is strength in employment. In Q4, employment and hours worked rose solidly, up 0.7% and 1.1% respectively.”

“As to ‘wages’, the implied average compensation per employee advanced, up by around 0.3% in the quarter, a still relatively subdued result.”