Australian company profits just collapsed again

Australia’s company profits have been trending lower since 2014 and analysts were expecting another step down with a median forecast of a fall of 1.7% during the second quarter of 2015.

But, data released by the Australian Bureau of Statistics this morning showed a larger than expected fall of 1.9% to follow last quarters fall of 0.3%. That takes the run of negative outcomes to 5 quarters in a row.

Looking at the key sectors of the economy in the industry break up it’s clear mining is still struggling with a 9.9% fall in the seasonally adjusted profit estimate while manufacturing fell only 0.8% seasonally adjusted.

Electricity, gas and, water and waste rose 4.1%, construction fell 4.7%, wholesale trade was 14.5% higher while retail trade rose 3.3% but, accommodation and food services dipped 0.5%. Transport, postal and warehousing fell 2.1%, information media and telecom business saw profits drop 2.3% while financial and insurance services saw profits drop an astonishing 38.9% in seasonally adjusted terms.

It’s worth noting this sector is prone to wild seasonally adjusted swings in this data set. Amongst the other sectors other services, which saw profits rise 20.8% was the stand out.

Also released this morning was data which showed wages and salaries rose 1.1% in the June quarter while inventories were flat for the quarter.

There is going to be plenty of movemnet as the partial indicators of GDP are released today and tomorrow before Wednesday’s Q2 GDP release but on balance the bigger fall in company profits and the smaller outcome for inventories (the market was expecting a rise of 0.2%, Westpac +0.5%, is likely to see some reduction in expectations of growth in the quarter and put some subtle downward pressure on the Aussie dollar and interest rates.

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