Small business profits rise and retail sales on the upswing

After a slowdown in the September quarter of 2021, the data showed that all company profits, inventories and wages were increasing.

The headline rise for company profits is more likely to be on the conservative side as it would have been affected by the winding back of state and federal supports during the pandemic. Non-mining profits were up a strong 9.1 per cent, while mining profits fell 5.7 per cent.

The industry breakdown was surprising, with hospitality and arts and recreation profits declining again. The strength was concentrated in finance (+77 per cent q/q) and transport (+27 per cent). Small business profits rose a strong 13 per cent q/q in Q4 and were up 18.6 per cent over the year.

The rise in company profits was not the only good news with retail sales figures also increasing in January after many predicted they would slump further due to the Omicron outbreak.

Australian retail sales increased 6.4 per cent in January compared to the same time last year, and rose 17.7 per cent compared to January 2020, with Western Australia leading the surge after a jump of 8.3 per cent.

The January result follows a fall of 4.4 per cent in December 2021, after consecutive rises of 7.3 per cent in November 2021 and 4.9 per cent in October 2021.

Director of quarterly economy wide statistics for the Australian Bureau of Statistics, Ben James, said the rise continues to add strength to the post Delta lockdown retail recovery with sales at the second highest level in the series.

“The emergence of the Omicron variant and rising COVID-19 case numbers, combined with an absence of mandated lockdowns has resulted in a range of different consumer behaviours. We have seen the type of spending previously associated with lockdowns occurring simultaneously with those associated with the easing of lockdown conditions,” Mr James said.

“This had led to variations across the industries with food retailing recording a rise in sales consistent with previous COVID-19 outbreaks as consumers exercise caution amidst surging case numbers.”

However, once again department store sales were down (-3.6 per cent) although clothing, footwear and personal accessories continues to recover well, with sales up 7 per cent followed by cafes, restaurants and takeaway food which increased 6.2 per cent.

Australian Retailers Association CEO Paul Zahra said January was an up and down month for retailers with Omicron impacting staff and supply chains, but sales overall have held up well.

“Retailers have been resilient throughout the pandemic, and despite all the disruption from Omicron, it’s pleasing to see an increase in sales given the difficult trading conditions for many businesses in January,” Mr Zahra said.

“Whilst businesses were battling ongoing supply chain issues and staff shortages due to the rising Omicron cases, it had little impact on consumer spending and the willingness of people to get out and shop.

“We’re now looking forward to our CBD retailers receiving a much-needed boost, in Sydney and Melbourne in particular, where the ‘work from home’ directions have been removed along with the indoor mask mandate. People are now heading back to their offices in our two largest cities, which will significantly improve foot traffic and local businesses will receive a natural uptick in trade as a result.”

However, Mr Zahra said businesses in flood-affected areas of south-east Queensland and northern NSW were now in more need of government support.