Negative growth for the September quarter has become more of a possibility after the release of surprisingly poor figures on business inventories and profits.
The falls in business stocks and profits in the quarter have got some economists wondering if growth might fall into the red zone for the quarter, while others say a drop to around 0.1% to 0.3% wouldn’t surprise.
Taken with the weak construction figures, the fall in investment in some parts of business investment, moderate retail sales and trade figures, some economists reckon the chances of a slip into negative growth is very possible.
On top of this government stimulus spending continues to lose impetus (we saw that with the fall in investment in buildings), while new home building was also weak.
But it should be realised that if this happens, it is not an economic disaster, it’s merely the result of a combination of parts of the economy that have slowed, or been slowed by the Reserve Bank or the switching off of government stimulus spending.
Whatever the outcome, it will be a big fall from the 1.2% fall in the June quarter (which has a chance of being revised after a bigger fall in business stocks in that quarter was cut back, while we have updated figures on export income from iron ore and coal shipments).
The figures from the Australian Bureau of Statistics showed a sharp 0.8% fall in business stocks in the quarter (mostly due to mining companies shipping more iron ore and especially coal backlogs in Queensland).
At the same time gross company profits fell a seasonally adjusted 1.5% in the quarter.
The estimated 0.8% fall in business inventories, seasonally adjusted, followed a revised 0.1% fall in the June quarter (they were down -0.5%).
Economists were expecting inventories to have risen by 0.4% in the September quarter.
The 1.5% fall in gross operating profits, in current prices, in the September quarter, seasonally adjusted, was after an 18.9% surge in the June quarter.
All up they are up 25% in the year to September (down slightly from the 27.5% fall in the year to June).
Offsetting that was a 2.1% rise in wages for the quarter, which are now up 7.2% for the year.
Some economists say the growth figure is more likely to be around 0.3% or perhaps 0.2% than go negative.
A rise of up to 0.5% would still leave growth in the year to September around 3.4%, anything less (say 0.2%) and the growth rate would still be above 3%, a solid figure.
