MNI DATA ANALYSIS: Australia Q1 Inventories Upside Risk To GDP

--Company Profits Exceed Expectation As Mining, Construction Jump

By Sophia Rodrigues

     SYDNEY (MNI) - Business inventories surpassed expectations in the first

quarter, posing upside risk to the Q1 GDP forecast. Company profits also rose

more than expected as profits in mining and construction surged.

     Data published by the Australian Bureau of Statistics Monday showed

business inventories rose 0.7% q/q in Q1 after a 0.2% rise in Q4. The outcome

beat MNI median forecast for a 0.1% q/q and was outside the range predicted by

economists in MNI poll.

     Company profits rose 5.9% q/q in Q1 after an upwardly revised 2.8% in Q4.

The outcome was higher than MNI median forecast for a 3.0% q/q rise and outside

the range predicted by economists.

     The rise in inventories was largely on account of increase in wholesale

trade inventories which rose 3.5% following three straight quarters of decline.

In trend terms, it rose 0.4% q/q, marking the fastest rate since Q4 of 2016.

     Manufacturing inventories also supported the increase, rising 0.5% q/q

after a 0.1% rise in Q4. Retail inventories disappointed with a 1.8% q/q fall

and posted four straight quarters of decline.

     Company gross operating profits rose by the fastest pace in five quarters,

thanks to a surge in mining profits which rose 10.9% q/q -- the fastest rate in

five quarters. Construction profits rose 10.1% to post the first increase in

five quarters and the biggest gain since Q4 of 2016.

     Another important indicator in the data was wages and salaries which slowed

to a 0.8% q/q rise in Q1 after an upwardly revised 1.2% growth in Q4.

Significantly, despite a strong increase in profits, the wage bill slowed in the

mining industry, up 1.2% q/q after a 2.5% rise in Q4.

     From Business Indicators data for the first quarter published by the

Australian Bureau of Statistics on Monday:

                                                  Q1                        Q4

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                                        %Change, Q/Q              %Change, Q/Q

Inventories                                     +0.7        +0.2 (no revision)

MNI Median                 -0.1 (Range -1.0 to +0.5)

Company Operating Profits                       +5.9  +2.8 (revised from +2.2)

MNI Median                 +3.0 (Range +1.5 to +4.0)

Wages and Salaries                             +0.8%  +1.2 (revised from +1.0)

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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