Profits in mining sector on the rise
Australian company gross operating profits rose 6.9 percent in Q2 2016 on a seasonally adjusted basis. The result was largely driven by strong performance in the manufacturing and mining sectors writes Sam Green, Advisor at Options Educator, TradersCircle.
Profits in the mining sector rose 14.2 percent on a seasonally adjusted basis, this was despite a fall in volumes, which would indicate a rise in prices received by the mining sector for the quarter.
Profits in the manufacturing sector rose 22.6% on a seasonally adjusted basis, with only a slight increase in volumes. This is a positive sign for Australia’s much-maligned manufacturing sector. This comes as Australian manufacturing PMIs have shown expansion in the sector for each of the thirteen months to July; with the expansion finally coming to a halt in August.
Profits in the constructing sector plunged during the quarter, falling 27.7 percent during the quarter, despite a rise in volumes, which may indicate that the supply of goods and services from the construction sector is starting to become saturated, after a period of strong property price growth.
A seasonally adjusted estimate for wages and salaries rose 0.8 percent during the quarter, with a rise of 2.8 percent for the year to the June quarter. With CPI tracking at an annualised rate of approximately 1 percent, this represents positive real wages growth, which is an encouraging sign for the Australian economy.
The rise in profits for the quarter came after a fall of 4.4 percent in the previous quarter. Despite the strong performance in the 2nd quarter, Australian company profits are exactly where they were a year ago on a seasonally adjusted basis; and they have fallen 4.3 percent on a trend basis.
Although the Q2 profits result was very strong, (and real wages growth in a developed nation is especially positive), there was no yearly growth in gross operating profits. Additionally, manufacturing and services PMIs have started to fall since the end of the quarter; and the strong quarterly profit growth is therefore not solid evidence of a robust economic turn-around in Australia.
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