Lending finance
- Lending slumped in February. Total lending finance fell by 5.7 per cent in February after sliding by 6.1 per cent in January. Lending totalled $49.3 billion in February – the weakest reading in over five years.
- According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.3 cents per litre to 143.9 cents a litre in the week to April 10 – a 30 month high.
- Motorists are likely to see a further increase in petrol prices over the coming weeks. The Singapore unleaded price has risen to a 32-month highs, up by almost US$8 a barrel in the past fortnight. CommSec expects pump prices to rise by a further 3-5 cents a litre in the second half of April.
What does it all mean?
- Interest rate hikes always tend to hit the economy with a lag and this time it is no different. The November rate hike only started to have an impact on lending finance in January and lending slumped further in February. Lending has now fallen by almost 12 per cent in the first two months of 2011 and is holding at the weakest levels in over five years.
- Lending finance is a forward-looking indicator of economic activity – as any rise in borrowings will eventually translate to a pickup in spending and production. The impact of the floods is clearly complicating analysis of the lending data, but the sustained softness of consumer borrowing remains the key concern – especially given that personal finance has fallen for six out of the last eight months.
- The key issue for the Reserve Bank is how long will this weakness last. In late 2010 there were tentative signs of thawing in the conservative attitudes of consumers and businesses, but it seems that once again activity levels have tracked backwards. The Reserve Bank would need to see some improvement in economic conditions before justifying the next rate hike. CommSec expects the Reserve Bank to stay on the interest rate sidelines for at least the next three months – especially given that inflation looks to be well contained at present.
- Petrol prices continue to creep higher and have now reached the highest levels in 2½ years. And unfortunately for motorists it is unlikely to get any better over the next couple of weeks.
- The potential threats to oil supplies from the Middle East and North Africa remains the key driver of near term prices. And over the past fortnight, the Singapore unleaded fuel price has surged by almost US$8 a barrel and is holding at 32-month highs. The one advantage that Aussie motorists have is the strength of the Australian dollar, but even the stronger domestic currency can only do so much, and as such part of the increase in the global oil price will need to filter through to domestic pump prices.
- The terminal gate price (wholesale) is certainly responding, lifting by a further 1.7 cents a litre over the past week. Given that wholesale prices eased modestly two weeks ago, CommSec expects prices to track sideways over the next couple of days. However in the second half of the month it looks like motorists will be paying between 3-5 cents a litre more for fuel.
What do the figures show?
Lending Finance:
- Total new lending commitments (housing, personal, commercial and lease finance) fell by 5.7 per cent in February after sliding by 6.1 per cent in January. However over the prior four months lending was up a much healthier 12.1 per cent in cumulative terms. Lending totalled $49.3 billion in February – the weakest reading in over 5 years. Overall lending was down 4.2 per cent over the year.
- All housing finance (owner occupier & commercial) fell by 4.6 per cent in February, after sliding by 5.3 per cent in January.
- Commercial finance fell by 6.6 per cent in February. Within commercial commitments, fixed lending fell by 9.9 per cent while revolving credit rose by 1.0 per cent. Commercial loans are down 1.7 per cent on a year ago.
- Personal finance fell by 3.5 per cent in February – marking the sixth fall in the past eight months. Within personal commitments, fixed lending fell by 5.0 per cent while revolving credit fell by 1.8 per cent. Personal loans are down 11.7 per cent on a year ago and currently stand at two-year lows.
- Lease finance fell by 10.4 per cent in February and loans are up 4.1 per cent over the year.
Petrol prices:
- According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.3 cents a litre to 143.9 cents a litre in the week to April 10. The metropolitan price rose by 0.5 c/l to 143.5 c/l, while the regional average price remained flat at 144.8 c/l.
- Average petrol prices across states over the past week were: Sydney (up 2.5 cents to 142.3 c/l), Melbourne (down 0.7 cents to 142.8 c/l), Brisbane (down 1.7 cents to 145.2 c/l), Adelaide (up 3.3 cents to 145.0 c/l), Perth (down 0.6 cents to 143.3 c/l), Darwin (down 1.5 cents to 147.0 c/l), Canberra (down 0.4 cents to 146.5 c/l) and Hobart flat at 149.9 c/l).
- The national average wholesale (terminal gate) rose to a fresh 30-month high of 136.1 cents a litre today, up by 1.7 cents a litre over the past week.
- Last week, the key Singapore unleaded petrol price rose by US$5.40 (4.3 per cent) to US$130.46 a barrel – a 32- month high. In Australian dollar terms the Singapore gasoline price rose by a more sedate $3.10 (2.6 per cent) over the week to $123.99 a barrel.
What is the importance of the economic data?
- Lending Finance is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.
- Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum. National average retail prices are calculated as the weighted average of each State/Territory’s metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions.
What are the implications for interest rates and investors?
- The sustained lift in the price of petrol is further bad news for motorists, taking precious spending dollars out of consumer pockets. Retailers already have to contend with the effects of the weather on seasonal spending, consumer conservatism and higher utility prices. CommSec doesn’t expect a rate hike until at least August.
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