Company profits were softer than expected during the first three months of 2019, with mining companies again enjoying the benefits of strong iron ore prices.
Seasonally adjusted gross operating profits at Australian companies rose by a below-expectation 1.7 per cent in the March quarter, though the Australian Bureau of Statistics upwardly revised its December quarter growth from 0.8 per cent to 2.8 per cent.
Profit growth for the March quarter was driven by the resources sector, with mining profits up 5.2 per cent for the quarter and more than 20 per cent for the year.
Iron ore prices rose about 20 per cent over the quarter to more than $US85.
Non-mining profits ex-finance were broadly flat as anticipated, consistent with soft conditions across the broader economy.
ANZ said weakness was most apparent in arts and recreation, down 15 per cent for the quarter, as well as rental, hiring and real estate (down 10 per cent), and construction (down 7.0 per cent).
“Overall, the profit results are a disappointment, and difficult to reconcile with upbeat investment plans in the Q1 capex survey last week,” ANZ economists said in a release.
However, a surprising 0.7 per cent bounce in inventories provided some offset, and is tipped to add around 0.2 percentage points to first quarter GDP growth announced on Wednesday.
Consensus forecasts centre on GDP growth of 0.4 per cent in the quarter with the range of estimates from 0.2 per cent to 0.6 per cent.
Meanwhile, the March quarter wages bill grew by a “robust” 1.1 per cent and the December result revised up a touch to 0.9 per cent growth from an initial 0.8 per cent.
Westpac analysts said a 0.9 per cent rise in the number of hours worked in the quarter was an improvement on the 0.4 per cent and 0.5 per cent for the previous two quarters.
“While private demand has been weak, spending from the public sector has been increasing at a well above trend pace, supporting job creation of late,” Westpac said in a note.
A data-heavy week of ABS releases continues on Tuesday with March quarter balance of payments, government finance, and April retail trade.
The Reserve Bank is also expected to cut the cash rate to 1.25 per cent.
First quarter GDP data follows on Wednesday, with March quarter international trade on Thursday, and April lending finance data on Friday.