NAB Business survey; Weekly petrol prices
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Business conditions at 33-month high: NAB
Petrol prices ease: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1.0 cent per litre to 154.1 cents a litre in the week to January 26. CommSec expects fuel prices to lift by 2 cents a litre over the next fortnight.
- Higher prices ahead: The wholesale (terminal gate) petrol price stands at 145.02 c/l, up 1.0 cent a litre over the week. Over the past week the key Singapore unleaded petrol price rose by rose by $4.91 in Australia dollar terms to $136.41 a barrel – a 28-month high.
- Business conditions at 33-month high: The NAB business confidence index eased from +6.1 to +5.8 in December. The business conditions index improved from minus 2.9 points to a 33-month high of +4.2 points. The survey was conducted from January 9 to 15.
What does it all mean?
- It was only a few months ago that business confidence levels hit four year highs, and while confidence levels have eased modestly in the past couple of months, actual business conditions have now surged to the best levels in almost three years. It is clear that the healing process is underway and Aussie businesses are noticing much more favourable conditions.
- Not only did business trading conditions improve substantially in early January, but across the sub-indices, profitability actually expanded at the fastest pace in 33 months. The Commonwealth Bank Business Sales Index confirmed a similar trend in recent months with a strong lift in broad-based economy wide spending. No doubt the low interest rate environment, increase in housing activity and lift in retail spending are all contributing to the improvement in business activity and overall profitability.
- The Reserve Bank would be encouraged by the way the economic recovery is panning out. The low Australian dollar is helping with the structural rebalance across the domestic economy, while consumers and businesses are starting to feel more confident to spend. Importantly, if the lift in business profitability and conditions is sustained in coming months, it should translate through to a lift in employment. CommSec expects employment growth to lift towards mid-2014. Interest rates look likely to remain unchanged in coming months.
- According to the official data, the national petrol price fell by 1 cent last week – a mild but much needed reprieve for motorists. Unfortunately petrol prices look likely to lift modestly in the coming fortnight, as an increase in global oil prices and a lower Australian dollar filters through to pump prices.
- The wholesale price has risen by 1 cent a litre over the past week. At the same time the key Singapore unleaded petrol price rose by rose by $4.91 in Australia dollar terms last week to $136.41 a barrel – a 28-month high and it should filter through to domestic pump prices in the next couple of weeks. CommSec expects fuel prices to rise by 2 cents over the next 7-10 days.
What do the figures show?
National Australia Bank Business Survey:
- The NAB business confidence index eased from +6.1 to +5.8 in December. The business conditions index improved from minus 2.9 points to a 33-month high of 4.2 points.
- The index of trading conditions improved from +1.9 points to a 33-month high of +12.5 points; employment improved from minus 8.1 points to minus 4.5 points; profitabilityimproved from minus 3.6 points to a 33-month high of 5.8 points; and forward orders weakened from minus 1.7 points to minus 2.3 points.
- Inflationary pressures increased in December with labour and purchase costs rising at a faster pace than prices. The monthly reading of labour costs rose at a 0.6 per cent quarterly rate in December after a 0.6 per cent rise in November. And purchase costs rose at a 0.7 per cent quarterly rate in December, after a similar result in November.Prices rose by 0.3 per cent after a 0.2 per cent rise in November. Retail prices rose at a 0.1 per cent quarterly rate in December, down from 0.4 per cent in November.
- Capacity utilisation lifted from 79.7 per cent in November to 80.1 per cent in December, but below the long-term average of 81.2 per cent.
- The proportion of firms reporting that they did not require credit rose from around 48 per cent in November to around 72 per cent in December.
Petrol prices:
- According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1 cent a litre to 154.1 c/l in the week to January 26. The metropolitan price fell by 1.4 c/l to 153.1 c/l, while the regional average price fell by 0.3 c/l to 156.1 c/l.
- Average unleaded petrol prices across states and territories over the past week were: Sydney (fell by 1.8 cents to 149.8 c/l), Melbourne (down by 0.4 cents to 152.0 c/l), Brisbane (up 1.4 cents to 157.7 c/l), Adelaide (down 5.2 cents to 150.7 c/l), Perth (down 1.0 cents to 153.2 c/l), Darwin (down 0.2 cents to 172.9 c/l), Canberra (fell by 0.1 cents at 158.4 c/l) and Hobart (down 0.4 cents to 161.8 c/l).
- Today, the national average wholesale (terminal gate) unleaded petrol price stands at 145.02 c/l, up 1.0 cent a litre over the week and up almost 13 cents since the lows in early November.
- Last week the key Singapore unleaded petrol price rose by US$2.50 (2.2 per cent) to US$118.50 a barrel. But in Australian dollar terms the Singapore gasoline price rose by a much larger $4.91 last week to $136.41 a barrel or 85.79 cents a litre – a 28-month high.
- Figures from MotorMouth show that petrol prices have low point or nearing the trough in the discounting cycle across most capital cities at present, and should lift substantially within the next few days.
- The monthly National Australia Bank business survey is valuable in providing a timely reading on the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.
- Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). 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. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.
- The latest business survey is certainly encouraging. Confidence is holding steady and business conditions are now lifting. If the rise in profitability is sustained it should translate through to healthy growth in employment over the medium term.
- Interestingly the discounting cycle is at a trough (low point) across most capital cities, and should rachet higher in coming days. The bottom line is motorists would be best served filling up the vehicle now before prices lift substantially
- Today’s economic data gives the Reserve Bank further reason to stay on the interest rate sidelines over the next few months.
What is the importance of the economic data?
- The monthly National Australia Bank business survey is valuable in providing a timely reading on the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.
- Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). 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. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.
What are the implications for interest rates and investors?
- The latest business survey is certainly encouraging. Confidence is holding steady and business conditions are now lifting. If the rise in profitability is sustained it should translate through to healthy growth in employment over the medium term.
- nterestingly the discounting cycle is at a trough (low point) across most capital cities, and should rachet higher in coming days. The bottom line is motorists would be best served filling up the vehicle now before prices lift substantially
- Today’s economic data gives the Reserve Bank further reason to stay on the interest rate sidelines over the next few months.
