Capacity use at 9yr highs. Debit accounts in vogue

Credit/debit cards; Tourism; Business survey; Petrol; Consumer Confidence

• Business survey: The NAB business conditions index eased from +12.7 points to +12.0 points in May. The business confidence index eased from a 7-year high of +13.2 points to +7.1 points. Capacity use rose to a 9-year high of 82.4 per cent.
• The average credit card balance fell by $18.10 to $3,105.90 in April. In smoothed terms (12 month average) the average balance was down by 0.8 per cent on a year ago.
• Debit accounts in vogue: The number of debit accounts is growing at the fastest annual rate for 4½ years, up 7.7 per cent on a year ago.
• Tourist arrivals/departures: Tourist arrivals rose by 4.7 per cent in April. And departures rose by 5.2 per cent. Arrivals are up 10.1 per cent on the year with departures up 6.7 per cent.
• Petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.8 cents to 130.7 cents a litre in the past week. But the wholesale price stands at a 2-month low. And the Singapore gasoline price is near 7-month lows in Australian dollar terms. Lower retail prices lie ahead.

What does it all mean?

• Aussie businesses are busy. In fact capacity use is the highest in nine years. At present the high capacity use isn’t driving up costs and prices, but it is something to watch. Survey results can bob around from month to month. But the rolling annual average shows that business conditions are the best in nine years.
• The average Aussie credit cardholder has just over $3,100 in outstanding purchases on his/her card. This is an average – some have nothing outstanding, others a lot more. And each person has a different credit card cycle. But what is clear is that credit card debt is not growing.
• Credit card accounts lifted by 1.2 per cent in the past year. Debit accounts grew by almost 8 per cent – highlighting the shift away from debt.
• Chinese tourists are still flocking down under. Tourists from Greater China (China and Hong Kong) comfortably exceed those from New Zealand, but tourists from mainland China should pass NZ in their own right in the next few months.
• Petrol is poised to get cheaper with the Singapore gasoline price near 7-month lows in Australian dollar terms. This is good news for motorists, and therefore retailers.

What do the figures show?

Credit & debit card lending:

• The average credit card balance fell by $18.10 to $3,105.90 in April. Compared with a year ago, the average credit card balance was down 0.7 per cent. In smoothed terms (12 month average) the average balance was down by 0.8 per cent.
• Of credit cards attracting interest charges, the average outstanding balance fell by $27.30 in April to $1,921.90. The average balance accruing interest was down by 2.4 per cent on a year ago. In smoothed terms (12 month average) the average balance was down by 1.9 per cent on a year ago.
• The average credit card limit recorded a fall of $12.80 to $9,041.80 in April to be down 0.6 per cent over the year. Usage of credit card limits stood at just 34.4 per cent in April.
• On average, there were 12.0 transactions made per each credit card account in April, up from 11.6 transactions a year ago. The average value of purchases was $136.72 in April with the rolling annual average of purchases rising from a 13-year low of $120.36 in March to $120.74.
• Credit card accounts stood at 16.75 million, up 1.2 per cent over the year – the slowest growth in over two years.
• There were 9.4 debit card purchases per account in April, up from 9.1 transactions a year ago. Average purchase size was a record low of $48.35 with the annual average down from $50.73 to a record low of $50.53.
• The number of debit cards stood at 45.37 million in April, up 7.7 per cent on a year ago.
• The number of ATM withdrawals in April was down by 9.5 per cent over the year with the value of withdrawals down by 5.7 per cent.

Overseas arrivals & departures

• Tourist arrivals rose by 4.7 per cent in April. And departures rose by 5.2 per cent. Arrivals are up 10.1 per cent on the year with departures up 6.7 per cent.
• In April, tourists from Greater China (China and Hong Kong) totalled 134,400 (mainland China 107,800, Hong Kong, 26,600), ahead of New Zealand (110,200). Greater China passed NZ for the first time in September 2015.
• Over the past year a record 1,245,500 tourists came to Australia from China, up 11.5 per cent over the year. Tourists from China and Hong Kong rose to a record 1,503,400 over the past year, up 11.5 per cent over the year. Tourists from New Zealand totalled 1,355,200 visitors over the past year, but were up just 3.1 per cent.
• Tourists from the US continue to soar, up 16.2 per cent over the past year to a 742,200 annual rate.
• Net permanent and long-term arrivals to Australia totalled 287,080 in the year to April – the highest level in 19 months. Permanent & long-term arrivals stood at 34-month high of 737,530 people.

National Australia Bank Business Survey:

• The NAB business conditions index eased from +12.7 points to +12.0 points in May (long-term average +5.1 points). The business confidence index eased from +13.2 points to +7.1 points (long-term average +5.8 points). The survey was conducted from May 22-26. In rolling annual terms, the business conditions index rose from +10.9 points to a 9-year high of +11.1 points.
• Components: the index of trading conditions was steady at +16.6 points; employment fell from +7.4 points to +6.3 points; profitability fell from +14.0 points to +10.5 points; forward orders rose from +2.6 points to +3.3 points.
• Inflationary indicators were mixed in May. The monthly reading of labour costs rose at a 1 per cent quarterly rate in May after a similar rise in April. Purchase costs rose at a 0.5 per cent quarterly rate in May, after a similar 0.5 per cent increase in April. Final product prices were up by 0.3 per cent in May after a 0.4 per cent gain in April. And retail prices fell by 0.2 per cent in May after rising 0.2 per cent in April.
• Capacity utilisation rose from 81.4 per cent to a 9-year high of 82.4 per cent (highest since June 2008) – well above the long-term average of 81.0.
• The proportion of firms reporting that they did not require credit eased from around 75 per cent in April to 52 per cent in April.

Petrol prices

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.8 cents to 130.7 cents a litre in the past week. The metropolitan petrol price rose by 1.1 cents to 131.0 cents per litre while the regional price rose by 0.2 cents to 130.0 cents per litre.
• The gross retail margin (pump price less terminal gate price) rose to 16.35 cents last week (average 12.57 cents over the last year)
• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 1.9 cents to 132.2 c/l), Melbourne (down by 4.7 cents to 132.6 c/l), Brisbane (up by 15.0 cents to 131.5 c/l), Adelaide (down by 12 cents to 125.9 c/l), Perth (up by 0.4 cents to 127.2 c/l), Darwin (down 0.1 cents to 131.3 c/l), Canberra (unchanged at 129.7 c/l) and Hobart (unchanged at 138.1 c/l).
• The national average Australian price of diesel petrol was unchanged at 128.1 cents per litre in the week to June 11. The metropolitan price was up 0.1 cents at 128.0 c/l, while the regional average price fell by 0.1 cents to 128.2 c/l.
• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 112.2 cents a litre, down by 2.9 cents a litre over the week. The terminal gate diesel price stands at 109.1 cents a litre, down by 3.4 cents a litre over the previous week.
• Last week the key Singapore gasoline price fell by US$1.75 or 2.8 per cent to US$60.70 a barrel. In Australian dollar terms the Singapore gasoline price fell by $3.95 a barrel or 4.7 per cent to $80.56 a barrel or 50.7 cents a litre.
• MotorMouth records the following retail prices for capital cities today: Sydney 127.8c; Melbourne 128.7c; Brisbane 140.6c; Adelaide 118.1c; Perth 134.2c; Canberra 129.7c; Darwin 131.1c; Hobart 138.0c.

What is the importance of the economic data?

•  The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
• The Australian Bureau of Statistics releases data on overseas arrivals and departures is produced monthly and is an indicator of the health of the tourism sector. The figures are also useful in understanding spending trends and tracking migrant numbers – an indicator with widespread implications for employment, housing and spending.
• The monthly National Australia Bank business survey is valuable in providing a timely reading about 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.

What are the implications for interest rates and investors?

• Investors always question the veracity of economic data. But the NAB business survey relies on actual businesses filling out forms. And they are saying that capacity use and overall business conditions are at or near the best levels in nine years. But at present cost pressures are contained.
• The travel sector is buoyant. More people are coming to Australia and more Aussies are travelling. And that makes sense with affordability of travel reportedly at the best levels on record.
• CommSec expects no change to interest rates in the foreseeable future.