Suddenly the prospects for solid growth in December quarter GDP is looking better, with only today’s current account and government finance data to cloud the outcome after the sharpest rise in corporate profits in more than 16 years was revealed yesterday.
It’s all down to the rebound in the resources sector (especially coal, iron ore and oil prices) in the closing months of 2016. The surge has already boosted our terms of trade sharply for two quarters in a row, and December’s rise will see national income up sharply (as yesterday’s company profits data for the December quarter from the Bureau of Statistics showed).
In fact Australia’s corporate sector chalked up its highest level of growth in operating profit during the December quarter in almost 17 years.
It was the strong showing from the mining sector, which rebounded from a slump a year earlier, saw overall company operating profits rose 20.1% quarter on quarter in the three months ended December 31, according to the Australian Bureau of Statistics.
The half year and full year figures from the likes of BHP Billiton, Rio Tinto, Whitehaven Coal and OZ Minerals (especially the final six months for the full year reporting companies) that drove the improvement in the ABS data.
This was up from a revised 1.5% (previously 1%) in the September quarter. This was the fastest pace of growth since the March quarter of 2001, when operating profit grew by just over one-third.
Yesterday’s December quarter data easily topped the 8% growth market forecast by economists.
Compared to a year ago, profits were up a massive 26.2%.
But partially offsetting that was a fall in wages in salaries in the December quarter of 0.5%, taking the increase for 2016 to just 1% – well behind the CPI of 1.5%.
The ABS report showed business inventories (stocks) were up just 0.3% in the December quarter from the previous three months, and up 1.6% from a year ago.
Today its the current account figures and some economists are tipping a good chance that we will report a current account surplus (thanks to the booming trade account), or a deficit so small as to be irrelevant.
If there is a surplus it would be the first since the late 1970’s.
The small revisions in September data suggest tat the 0.5% contraction could be revised upwards a bit in tomorrow’s national accounts.
Some economists now think there is a good chance the GDP may have risen closer to 1% in the quarter than last week’s forecast of 0.7%.
