Term deposits in vogue; Inflation lifts

Private sector credit; Air traffic; Weekly petrol prices

• Lending & deposits: Private sector credit rose by 0.4 per cent in September to be up 5.6 per cent over the year. Term deposits hit record highs and are up 8.9 per cent on the year – fastest annual rate in almost 4 years.
• Air passenger movements: In August there were 12.75 million passenger movements on domestic and international flights, up 2.9 per cent on a year ago. In smoothed terms, passenger number growth is at 3-year highs.
• Retail petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1.6 cents per litre to 120.2 cents per litre in the week to October 30. Prices rose in Sydney, Brisbane and Adelaide and were unchanged in Melbourne.
• Inflation gauge: The Melbourne Institute monthly inflation gauge rose by 0.2 per cent in October to be up 1.5 per cent on a year ago – equalling the fastest growth in seven months.
  The petrol figures have implications for retailers, especially petrol marketing groups. Private sector credit figures have implications for finance providers, retailers, and companies dependent on business spending

What does it all mean?

• The Bureau of Statistics data indicated that inflation had lifted from recent lows. Now the more-timely monthly inflation gauge from Melbourne Institute is showing the same. In fact the latest October data shows that the annual rate of inflation has equalled the fastest annual growth in seven months. Over the past five months, annualised growth has lifted to near 3 per cent. There are more signs globally of a lift in inflation. And domestically there are similar indications, together with a lift in economic activity.
• Despite super-low interest rates, investors are still keen to leave the money in the bank. Term deposits were on the outer with investors at the start of the year. Now they are back in vogue, lifting to record highs and growing at the fastest annual rate in almost four years. Simply investors are spreading investments around in line with the old adage “don’t put all your eggs in one basket.”
• Petrol prices are still well down on a year ago but they are largely in a holding pattern until later in the month when key global producers are due to sign off on production cuts. There is still significant uncertainty whether the cuts will be agreed.
• The lift in passenger number is yet another sign of the ‘healing process’. That is, there is more confidence that the global economy is on the improve. And at home the domestic economy is also lifting after the mid-year slowdown caused by the Brexit vote and Federal Election.

What do the figures show?

Private sector credit

• Private sector credit (lending) rose by 0.4 per cent in September after a similar lift in August. Annual credit growth eased from 5.8 per cent to 5.6 per cent.
• Housing credit grew by 0.5 per cent in September. Housing credit is up 6.4 per cent on a year ago.
• Owner occupier housing credit rose by 0.5 per cent in September to stand 7.3 per cent higher than a year ago – down further from the 7.7 per cent growth in the year to July (fastest annual growth in six years). Investor housing finance lifted 0.6 per cent in September to stand 4.8 per cent higher over the year, up from 4.6 per cent in August – the slowest growth in almost 7 years.
• Personal credit was down 0.1 per cent in September after falling by 0.1 per cent in August. Personal credit was down 1.3 per cent over the year – the biggest decline in over 4 years.
• Business credit rose by 0.2 per cent in September. Business credit is 4.7 per cent higher than a year ago, the slowest growth rate in 15 months.
• Term deposits rose by $3.5 billion to a record $548.1 billion in September. Annual growth lifted to 8.9 per cent in the month – the fastest rate in almost four years.

Petrol prices

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1.6 cents per litre to 120.2 cents per litre in the week to October 30. The metropolitan petrol price fell by 2.3 cents to 118.5 cents per litre while the regional price rose by 0.1 cents to 123.8 cents per litre.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 5.4 cents to 117.3 c/l), Melbourne (unchanged at 118.0 c/l), Brisbane (down by 5.0 cents to 117.0 c/l), Adelaide (down by 10.2 cents to 117.6 c/l), Perth (up by 7.0 cents to 121.5 c/l), Darwin (up by 5.5 cents to 127.7 c/l), Canberra (up by 0.2 cents to 129.1 c/l) and Hobart (up by 0.4 cents to 124.3 c/l).
• The national average Australian price of diesel petrol was up by 1.1 cents to 122.4 cents per litre in the week to October 30. The metropolitan price rose by 1.0 cents to 122.2 c/l, while the regional average price was up by 1.1 cents to 122.5 c/l.
• Today the national average wholesale (terminal gate) unleaded petrol price stands at 112.7 cents a litre, up by 0.9 cents a litre over the week. The terminal gate diesel price stands at 110.1 cents a litre, down by 0.1 cents a litre over the previous week.
  · Last week the key Singapore gasoline price fell by US25 cents or 0.4 per cent to US$63.65 a barrel. In Australian dollar terms the Singapore gasoline price rose by 3 cents a barrel to $83.78 a barrel or 52.69 cents a litre.
  · MotorMouth records the following retail prices for capital cities today: Sydney 128.2c; Melbourne 114.4c; Brisbane 112.9c; Adelaide 111.6c; Perth 117.6c; Canberra 128.6c; Darwin 128.3c; Hobart 124.8c.
  Air traffic data
• There were 9.7 million air passenger movements on domestic and regional flights in August, up 1.8 per cent on a year ago. International passenger movements totalled 3.06 million, up 6.5 per cent on a year ago. Total airline passenger movements were up by 2.9 per cent.
• In rolling annual averages, annual growth was 2.4 per cent on domestic routes (34-month high) and 7.6 per cent on international routes (63-month high).

Monthly Inflation Gauge

• The Melbourne Institute monthly inflation gauge rose by 0.2 per cent in October to be up 1.5 per cent on a year ago – equalling the fastest growth in seven months.

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.
• Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.

What are the implications for interest rates and investors?

• Financial market pricing indicates just a 4 per cent chance of a rate cut tomorrow. And this pricing is reinforced by the latest economic data. The Reserve Bank may elect to super-charge the economy with another rate cut, but it would prove a major surprise for most. It is doubtful that investors want to be surprised in the current environment.
• The lift in term deposits means that banks are being successful in attracting retail funds – funds that will enable banks to keep lending at current growth rates.
• The lift in air traffic data is encouraging for airlines, terminal operators and businesses dependent on air travel.