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Economists still gloomy on GDP after data

AAP logoAAP 5/12/2016

Economists are still bracing themselves for news of weak or even negative economic growth on Wednesday, after the latest round of economic figures.

Company gross operating profits rose by one per cent in the September quarter but that figure was boosted by a windfall gain from revalued business inventories.

"Excluding the IVA (inventory valuation adjustment), operating profits were actually flat and thus well below market expectations," National Australian Bank economist Tapas Strickland said.

Aggregate wage payments were up by 1.2 per cent in the quarter but profits of unincorporated businesses slumped by 8.5 per cent.

The figures from the Australian Bureau of Statistics on Monday also showed a faster rise in the volume of business inventories, which will add about 0.2 percentage points to growth in gross domestic product (GDP).

"However, that contribution will be more than offset by weakness in business investment and in residential construction," Mr Strickland said.

"On net this data suggests a negative quarterly GDP print is likely."

NAB currently expects GDP growth of minus 0.2 per cent for the quarter.

Westpac economist Andrew Hanlan said the profits figures added to the evidence that the economy was "soggy" around mid-year and he is sticking with his forecast for GDP growth - a modest rise of 0.2 per cent for the quarter.

"We interpret today's results as reducing some of the downside risks surrounding our central case forecast," he said.

ANZ Bank economist Felicity Emmett said the non-mining component of the company profits data was disappointing.

Aside from mining companies, profits were down by 0.7 per cent in the quarter and by 2.4 per cent through the year.

"We expect, though, that profits ex-mining are still being held down by the mining sector," she said.

"That is, the 20 per cent fall in construction profits over the past year is clearly related to the downturn in mining investment, while the 16 per cent decline in profits in professional services is also likely to have been affected."

Although all forecasts could be adjusted after foreign trade and public sector spending figures on Tuesday, MS Emmett said she was expecting a flat GDP result for the quarter on Wednesday.

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