Data Snapshot – Monday 5 June 2017
Monday, 5 June 2017
Company Profits
Commodity Price Boon Continued

Gross company operating profits rose by a larger than expected 6.0% in the March quarter. This
followed an increase of 20.1% in the December quarter. It was the largest back-to-back increase
in company operating profits since 2001.

Mining profits, which comprised more than one third of company profits, jumped by 13.0% in
the March quarter. It followed a gain of 46.3% in the December quarter, reflecting further gains
in commodity prices in the March quarter. Profits in the mining sector have increased for four
consecutive quarters.

It was encouraging that profits outside of mining were also solid, rising by 2.4%, following a
10.0% gain in the previous quarter.

Wages and salaries rose by 0.3% in the March quarter, which was a lacklustre (although not
unexpected) result, following a decline of 0.5% in the previous quarter.

Inventories jumped by 1.2% in the March quarter. This suggests inventories will provide a larger
than expected contribution to GDP growth in the March quarter.

Today’s data suggests some upside risk to our GDP forecast. We expect GDP rose by just 0.1% in
the March quarter and by 1.4% in the year to the March quarter. We will receive government
spending and net exports tomorrow, before finalising our GDP forecast for Wednesday.
Company Profits
%
Company Profits
$bn
%
$bn
60
60
60
60
45
45
50
50
30
30
40
40
15
15
30
30
0
0
20
annual % change
Non-mining profits
-15
-15
10
Source: ABS
-30
Mar-02
10
quarterly % change
Source: ABS
-30
Mar-98
20
Mining profits
Mar-06
Mar-10
Mar-14
Mar-18
0
Mar-98
0
Mar-02
Mar-06
Mar-10
Mar-14
Mar-18
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Data Snapshot – Monday 5 June 2017
Gross Company Operating Profits
Gross company operating profits rose by a larger than expected 6.0% in the March quarter. This
followed an increase of 20.1% in the December quarter. It was the largest back-to-back quarterly
increase in company operating profits since 2001.
The increase in profits was driven by mining profits, which comprised more than one third of total
profits. Mining profits increased 13.0% for the March quarter, accounting for more than 70% of
the increase in total profits in dollar terms). Commodity prices have pared those gains so far in the
current quarter. If this move is sustained, commodity prices will weigh on company profits in the
June quarter.
Outside of mining, however, total profits were solid, rising by 2.4% in the March quarter. In
percentage terms, the largest increase in profits for the December quarter was in administrative &
support services (15.8%), followed by arts & recreation services (13.7%), information, media &
telecommunications (9.3%) and professional, scientific & technical (5.6%).
The largest declines in company profits were in other services (-28.9% following a strong increase
in the previous quarter), accommodation & food services (-8.8%) and wholesale trade (-5.8%).
On an annual basis, profit growth strengthened considerably, rising by 39.7% in the March
quarter. This was the strongest annual increase in company profits since the December quarter
2001. By industry, the annual increase in profits was largest in financial & insurance services
(169.6%), mining (113.1%) and professional, scientific & technical (77.8%).
Inventories
Inventories lifted 1.2% in the March quarter, which was above consensus and our own
expectations. This suggests that inventories could provide a larger-than-expected contribution to
GDP growth in the March quarter.
The inventory rebuild was driven by mining (7.7%), electricity, gas, water & waste (5.5%) and retail
trade (1.8%) in the March quarter.
GDP Forecasts
Company profits and inventories were higher than expected, although wages and salaries growth
was lacklustre.
Today’s data suggests some upside risk to our GDP forecast. We expect GDP growth to rise by
0.1% in the March quarter and by 1.4% in the year to the March quarter. We will receive
government spending and net exports tomorrow, before finalising our GDP forecast for
Wednesday.
Jo Horton, Senior Economist
Ph: 02-8253-6696
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Data Snapshot – Monday 5 June 2017
Contact Listing
Chief Economist
Senior Economist
Senior Economist
Besa Deda
[email protected]
(02) 8254 3251
Josephine Horton
[email protected]
(02) 8253 6696
Janu Chan
[email protected]
(02) 8253 0898
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