JP Morgan economist Ben Jarman said inventories came out almost as expected, indicating that profits were a little soft.
“(It was) a pretty decent build up in inventories that was in line with what we had, so we won’t be adjusting out GDP forecast off the back of it,” Mr Jarman said.
“In the retail and wholesale space, there was a decent build up.
“That’s probably as you expect, given the fact that consumer spending was not great going into the end of the year, so that would have resulted in a build up of inventories.”
Estimated business inventories, in seasonally adjusted chain volume terms, rose 0.7 per cent in the December quarter after falling 0.9 per cent in the September quarter, the Australian Bureau of Statistics (ABS) said today.
Economists were expecting inventories to have risen 0.5 per cent in the December quarter.
Company gross operating profits, in current prices, fell 2.8 per cent in the December quarter, seasonally adjusted, and were up 14.7 per cent over the year.
Mr Jarman said the fall in gross operating profits shouldn’t affect December quarter GDP.
“It’s really negative across the board there,” he said.
“We think in terms of where we are heading, it does seem to be improving relative to what we saw in the third quarter.
“It seems to be better in most cases, so that will continue to pick up.
“Having a negative on profits does tend to have a negative affect on the income side of GDP.
“We’re not changing our number, but it does put a little bit of softness there in terms of downside risk,” he said.
JP Morgan is predicting GDP growth of 0.3 per cent in the December quarter, for an annual rate of 2.3 per cent.
National accounts due on Wednesday are expected to show GDP expanded 0.6 per cent, according to an AAP survey of 15 economists.
Originally posted here:
Business Indicators ‘Shouldn’t Alter GDP’