Despite a fall in corporate profits in the March quarter, many economists are looking for March quarter GDP to surprise on the upside in tomorrow’s national accounts.
The Australian Bureau of Statistics said yesterday that gross operating profits fell 4.7% in the first three months of the year, seasonally-adjusted, for a year-on-year decline of 8.4%.
Mining sector profits fell, while non-mining industries were also weak, down 3.3% for the year.
Wages and salaries however rose 0.6% in the quarter to be up a very strong 3.5% for the year – the strongest annual growth since 2012.
The profits figure was worse than expected, but the value of business inventories (stocks) rose 0.4% in the quarter which will translate to a 02% to 0.4% contribution to GDP when none was expected by economists who had pencilled in a steady stocks figure compared to the December, 2015 quarter.
UBS noted this, and said a 1.2% quarterly increase in sales would also be positive for one measure of GDP. That was the biggest quarterly rise in sales since 2009 (was this why business inventories were higher than expected?).
After a surprisingly robust 0.6% quarter on quarter expansion in the final quarter of 2015 (for an annual rate of 3.0%), output growth was expected to come in again at 0.6% for the first three months of the year, according to a Bloomberg survey of economists.
Growth of 0.6% will see the annual rate dip to 2.7% before any revisions of previous quarter’s figures.
But some economists reckon the figure could be as high as 0.9% to 1.0%, depending on the strength of exports in today’s current account data and government finance figures which are always a major unknown every quarter.
Economists agree the main drags on growth will come from soft consumer spending (retail sales growth slowed in the first quarter), weak business investment and construction spending and a quarterly drop in public demand because of one-off defence procurement items in the 2015 final quarter.
Citgroup economists reckon the GDP figures could disappoint on the low side, but UBS reckons they could surprise on the upside.
