ABS data points to gloomy growth outlook GARRY SHILSON-JOSLING AAP JUNE 02, 2014 3:22PM
THE nation’s latest economic figures — profits, wages, inventories and building approvals — weren’t as bad as they looked.
They were worse.
It was part of the usual barrage of data from the Australian Bureau of Statistics ahead of the quarterly national accounts, due on Wednesday, which includes the headline estimate of economic growth.
The number of residential building approvals fell by 6 per cent in April.
That fall was bad enough, but it followed two consecutive falls of about the same size.
And the less-noticed estimate of the value of approvals for non-residential buildings — hotels, hospitals, offices and so on — recorded a serious slump of 27 per cent.
That also followed a run of three increasingly steep falls.
As a result, the April value of approvals, residential and non-residential combined, came in at $5.88 billion, $2.31 billion below the average for the final quarter of last year.
The gloss has certainly worn off the building sector in a hurry. The rest of the economy isn’t looking too flash either.
In its “Business Indicators” publication, the bureau gives us estimates of components of national income — company profits, other business profits and total wages — that can be added up to estimate gross domestic product.
Most economists look first at company gross operating profits, which looked strong in the March quarter with a rise of 3.1 per cent.
But half of that gain came from inventory revaluations which aren’t included in GDP because they represent windfall gains rather than actual production.
And the other major chunk of income comes from wages which, the ABS said, rose by a tiny 0.2 per cent in the March quarter.
Unincorporated business profits increased strongly, but is a small part of the total of all three measures, which rose by just 0.9 per cent.
And that’s before allowing for inflation, and GDP is typically measured in “real” or inflation-adjusted terms.
So the headline profits measure greatly overstates the strength in the economy likely to be revealed by the national accounts on Wednesday.
Another measure from the same publication — business inventories — tells an even gloomier story.
After falling by 0.6 per cent in the previous three months, inventories fell by 1.7 per cent in the March quarter.
That means less production for any given level of spending, to the tune of about 0.5 per cent of GDP.
Ahead of the figures, economists’ forecasts for GDP growth in the quarter were centred on 0.8 per cent — in line with the long-run average.
These income and inventories figures are likely to prompt some to revise down their expectations for the March quarter.
And the building approvals numbers will cast a shadow over the prospects for growth over the remainder of the year.
