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By Sophia Rodrigues
     SYDNEY (MNI) - Business inventories rose less than expected in the fourth
quarter, posing downside risk to Q4 GDP while company profits rebounded after
two quarters of decline.
     Data published by the Australian Bureau of Statistics Monday showed
business inventories rose 0.2% q/q in Q4 and followed a small downward revision
in Q3 inventories. The data also showed company gross operating profits rose
2.2% q/q after a 0.1% fall in Q3.
     The 0.2% rise in inventories was largely due to a rebound in mining
inventories to a 4.9% q/q rise from a 4.5% fall in Q3. The main drag came from
retail inventories which fell 0.5% q/q after no change in Q3. 
     Overall, the inventories data poses downside risk to current MNI median
forecast of 0.5% q/q and 2.5% rise in Q4 GDP, as it may detract from GDP or make
no contribution.
     Company gross operating profits rose after two straight quarters of decline
but in trend terms was negative for two quarters in a row. The rise in profits
was mainly due to a 4.2% q/q jump in mining profits that followed two quarters
of decline.
     According to Macquarie economist Justin Fabo, private non-financial
corporate profits fell 2.4% q/q in Q4 on a GDP-equivalent basis, and this was
much lower than the 0.5% rise he had expected.
     Another significant indicator in the data was wages and salaries which
slowed to a 1.0% q/q rise after 1.3% increase in Q3. According to Fabo's
estimate, the data implies small or no growth in average earnings in Q4 in the
national accounts data, given strong employment growth during the quarter.
     From Business Indicators data for the fourth quarter published by the
Australian Bureau of Statistics on Monday:
                                                 Q3            Q2
                                       %Change, Q/Q  %Change, Q/Q
Inventories                                    +0.2          +0.1
MNI Median                 0.0 (Range +0.1 to +0.6)
Company Operating Profits                      +2.2          -0.1
MNI Median                 0.0 (Range -1.5 to +6.0)
Wages and Salaries                            +1.0%         +1.3%
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: