The Australian Bureau of Statistics' (ABS) latest update on its Business Indicators, Australia report for the third quarter of this year makes for sober reading for investors dabbling in the country's share market (that makes all Australians via their superannuation).
The report shows that the seasonally adjusted estimate of total company gross operating profits eased to 1.9% in the September quarter from 2.4% in the June quarter and 6.3% in the three-month period before that.
The details of the report show that the slowing in total company profits was due to drops in profitability in: manufacturing (-5.1% in the September quarter from +1.8% in the June quarter); retail trade (-2.0% from +2.4%); wholesale trade (-1.1% from +3.1%); transport, postal and warehousing (-2.7% from +4.0%); and, "other services" (-8.1% from +19.8%).
While profits in some industries continued to grow, growth's slower than the previous three-month period: mining (+3.4% in the September quarter from +5.2% in the June quarter); financial and insurance services (+1.3% from +12.1%).
Companies that improved their profitability include: electricity, gas, water and waste services (+7.0% from -2.8%); construction (+9.8% from -2.8%); accommodation and food services (+13.5% from -3.8%); information media and telecommunications (+3% from -6.7%); rental, hiring and real estate services (+3.1% from +2.3%); arts and recreations services (+9.7% from -0.7%); and, professional, scientific and technical services (-1.0% from -3.8%).
To be sure, these stats would be considered ancient in financial market time but the trend is not our friend in this case.
This is because the ABS' trend estimates confirm the slowing in total company gross operating profits.
Profits have slowed to 2.7% in the third quarter from 3.4% in the second and 4.1% in the first.
The All Ordinaries positive correlation (and its lead) with company profits isn't one for optimism and one that the RBA should take note.