Australia business indicators remain mixed in Q3; GDP data in focus

Australian business indicators remained mixed during the third quarter of this year, with the market closely eyeing the period’s gross domestic product (GDP) data, which is expected to remain unchanged.

Business indicators were mixed in Q3, with profits growing at a slower-than-expected rate, and inventories and wages growing strongly. Disappointingly, non-mining profits were slightly down in the quarter, leaving them 2.4 percent lower over the past year.

Company profits were weaker than expected in Q3, rising a modest 1.0 percent q/q. Adjusting for gains on inventories, the GDP measure of non-financial profits was weaker, rising by just 0.4 percent q/q. Mining profits rose a solid 6 percent following on from a 16 percent gain in Q2. Profits ex mining declined 0.7 percent, which was a disappointing result coming after a strong 3.6 percent jump in Q2.

In addition, inventories rose 0.8 percent q/q in Q3, implying that stocks will add 0.2pp to growth in Q3. Growth in the wages bill was +1.1 percent q/q, much stronger than the WPI and labour market numbers implied, although the Q2 result was revised down from an initially reported 0.8 percent to just 0.4 percent.

This suggests the GDP measure of the wages bill could show a step-up in growth. With employment growing at around 0.2 percent in the quarter, this implies a solid rebound in the GDP measure of the average wage rate in the economy, which is encouraging for the inflation outlook, ANZ reported.

Meanwhile, AUD/USD currency pair has formed a bearish '2-crows’ candlestick pattern, indicating a downward trend at 0.74, down 0.35 percent, while at 7:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -55.83 (a reading above +75 indicates bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex