Petrol prices settle; Job market recovery

Weekly petrol price; Chinese trade data; Job advertisements

• Petrol prices lift: Due to a holiday in Canberra, the weekly national average Australian price of petrol won’t be available until Tuesday. But data shows that the national wholesale petrol price rose by 3 cents a litre over the past week.
• Hiring lifts again: Job advertisements rose by 0.9 per cent in February – the ninth straight gain.
• China trade data: The trade surplus widened from US60.03 billion in January to US$60.6 billion in February. Exports were up 48.3 per cent over the year while imports were down by 20.5 per cent.

What does it all mean?

• Global oil prices are stabilising with US Nymex around US$50 a barrel and UK Brent around US$60 a barrel. Australian petrol prices are also settling with wholesale prices broadly holding between 121 and 127 cents a litre.
• Both the Singapore gasoline price and domestic wholesale price have lifted around 20 cents a litre from lows, and while the retail price has been more volatile, on average across Australia prices have lifted around the same magnitude. So the outlook for pump prices will depend on the vagaries of the petrol discounting cycle.
• While pump prices jumped in Canberra and Hobart on Tuesday and Wednesday last week, the moves represented a lagged response to the higher wholesale price and pump price increases in other capital cities. Conspiracy theorists have suggested that than the timing of holidays may have prompted higher prices.
• The Chinese economy has slowed, reducing import demand. But world economic growth has lifted, boosting Chinese exports. The situation bears watching closely, but if global economic growth continues to lift, that augurs well for Australian commodity producers. In smoothed terms exports are rising at an 11.5 per cent annual rate while imports are falling at a 6 per cent annual rate.
• The job market continues to heal. Advertisements seeking additional staff rose for the ninth straight month in February, hitting the highest levels in over two years. The result is important because other methods are now used more often to hire new staff including social media, placement agencies and by jobs advertised directly on company websites. We expect that employment rose by 18,000 in February with the unemployment rate falling from 6.4 per cent to 6.3 per cent.
• Due to a holiday in Canberra, weekly figures on capital city petrol pump prices won’t be available until Tuesday.
• On Friday, the national average wholesale (terminal gate) unleaded petrol price stood at 121.50 cents a litre, up 3 cents on the previous week and now well up from the 6-year low of 100.4 cents per litre set on January 20.
• Last week the key Singapore gasoline price rose by US50c or 0.7 per cent to US$77.00 a barrel. Singapore gasoline previously hit a near 6-year low (lowest since March 2009) of US$52.20 a barrel on January 13. In Australian dollar terms the Singapore gasoline price rose by 48 cents a barrel or 0.5 per cent last week to $98.65 a barrel or 62.05 cents a litre. In Australian dollar terms, the Singapore gasoline price has lifted A18.8 cents from the mid-January lows.
• Figures from MotorMouth show that petrol prices eased modestly in Sydney, Melbourne and Brisbane last week but Adelaide, Darwin and petrol prices edged higher while Canberra and Hobart prices lifted 15-20 cents a litre.

What do the figures show?

Job Advertisements

• Job advertisements rose by 0.9 per cent in January – the ninth straight gain – to the highest levels in 28 months. Newspaper advertisements rose by 8.1 per cent in the month, but the far larger component of internet ads rose by 0.7 per cent. Job ads were up 9.8 per cent on a year ago. In trend terms, ads rose by 0.8 per cent in the month, the 16th straight gain.

Chinese data

• The trade surplus widened from US60.03 billion in January to US$60.6 billion in February. Exports were up 48.3 per cent over the year (forecast: +14.2 per cent) while imports were down by 20.5 per cent (forecast: -10.0 per cent.
• 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 monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 16th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10^th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.
• A year ago the national petrol price was 157.6 cents a litre; today it is closer to 130c. So while petrol prices have risen in recent weeks, the average household is still saving $33 a month on filling the car up with petrol. So the lower petrol price is still stimulatory.
• While the slowdown in China is translating into lower imports, stronger growth in the US and Asia is boosting Chinese exports. So overall the situation remains stable for Australian resource producers. But if the Chinese economy slows markedly in coming months, the Reserve Bank may need to cut interest rates further to support local businesses – especially if the Aussie dollar stays stubbornly high.
• Employers are looking to hire more staff. The process has still some way to go, but it is encouraging. Economists fail to account for hiring of staff by small and medium-sized businesses – the lifeblood of labour demand. If the pace of hiring picks up in coming months, the Reserve Bank would be less likely to cut rates again. But ultimately rate cuts will depend on how long and how far economic growth underperforms more ‘normal’ growth rates.

What is the importance of the economic data?

• 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 monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 16th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10^th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.

What are the implications for interest rates and investors?

• A year ago the national petrol price was 157.6 cents a litre; today it is closer to 130c. So while petrol prices have risen in recent weeks, the average household is still saving $33 a month on filling the car up with petrol. So the lower petrol price is still stimulatory.
• While the slowdown in China is translating into lower imports, stronger growth in the US and Asia is boosting Chinese exports. So overall the situation remains stable for Australian resource producers. But if the Chinese economy slows markedly in coming months, the Reserve Bank may need to cut interest rates further to support local businesses – especially if the Aussie dollar stays stubbornly high.
• Employers are looking to hire more staff. The process has still some way to go, but it is encouraging. Economists fail to account for hiring of staff by small and medium-sized businesses – the lifeblood of labour demand. If the pace of hiring picks up in coming months, the Reserve Bank would be less likely to cut rates again. But ultimately rate cuts will depend on how long and how far economic growth underperforms more ‘normal’ growth rates.