Petrol near 9-month lows; Tame China inflation

Petrol prices; China inflation data

• Petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.1 cents to 120.1 cents a litre in the past week.
• Chinese inflation: Consumer prices held steady at an annual growth rate of 1.5 per cent in the year to June (forecast +1.5 per cent). Producer prices were up 5.5 per cent on the year (forecast +5.5 per cent).
• Non-food prices are up 2.2 per cent over the year with food prices down by 1.2 per cent.

What does it all mean?

• Motorists are enjoying cheap fuel at present. The national average petrol price is holding near the lower end of the recent trading range ($1.20-$1.25). In effect domestic pump prices have been playing catch-up following some substantial falls in global oil prices in mid to late June. And now prices are likely to stabilise around current levels.
• It is important to keep in mind that the national average pump prices is holding near the lowest levels in around nine months. Since early May, CommSec estimates that average Australian motorists are saving as much as much as $12 a month from the cost of filling their cars up with petrol. Filling up the car with petrol is the single biggest weekly expense for most households. So lower petrol prices represent good news for retailers – especially those marketing more discretionary goods and services.
• And motorists could save even more dollars at the pump if they keep a close eye on the discounting cycle. Between the peak and the trough in the cycle motorists could save themselves up to 20 cents a litre. In fact last week petrol was trading closer to $1 a litre in parts of Sydney and even below a $1 a litre in parts of Perth. Not so today.
• The Chinese inflation data has no implications for currency markets. Food prices are falling in annual terms, giving consumers more spending power. And they need it with health costs rising at a near 6 per cent annual rate. The focus shifts to the trade data later in the week and retail sales and investment data next week.
• Overall the Reserve Bank is likely to be comfortable with how the domestic economy is evolving. CommSec expects official interest rates to remain on hold over the rest of 2017.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.1 cents to 120.1 cents a litre in the past week. The metropolitan petrol price rose by 0.7 cents to 117.7 cents per litre while the regional price fell by 0.9 cents to 125.0 cents per litre.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 7.1 cents to 117.2 c/l), Melbourne (down by 2.4 cents to 114.1 c/l), Brisbane (down by 8.3 cents to 114.9 c/l), Adelaide (up by 13.6 cents to 127.4 c/l), Perth (down by 0.9 cents to 118.5 c/l), Darwin (down 0.1 cents to 130.8 c/l), Canberra (down 0.2 cents to 129.0 c/l) and Hobart (down by 0.2 cents to 136.8 c/l).
• The national average Australian price of diesel petrol was down by 0.3 cents to 126.6 cents per litre in the week to July 9. The metropolitan price was down by 0.4 cents to 126.6 c/l, while the regional average price fell by 0.3 cents to 126.6 c/l.
• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 108.6 cents a litre, up by 1.2 cents a litre over the week. The terminal gate diesel price stands at 109.8 cents a litre, up by 3.2 cents a litre over the week.
• Last week the key Singapore gasoline price rose by US85 cents or 1.4 per cent to US$60.40 a barrel. In Australian dollar terms the Singapore gasoline price rose by $2.27 or 2.9 per cent to $79.63 a barrel or 50.08 cents a litre.
• MotorMouth records the following retail prices for capital cities today: Sydney 127.6c; Melbourne 127.2c; Brisbane 111.5c; Adelaide 123.3c; Perth 112.0c; Canberra 129.0c; Darwin 130.6c; Hobart 130.7c.

Chinese inflation:

• Consumer prices held steady at an annual growth rate of 1.5 per cent in the year to June. Economists had expected annual growth of 1.5 per cent.
• Annual growth of producer prices held steady in June at 5.5 per cent (forecast 5.5 per cent).
• Chinese consumer prices fell by 0.2 per cent in June after falling by 0.1 per cent in May.
• Food prices fell by 1 per cent in June and non-food prices rose by 0.1 per cent. Non-food prices are up 2.2 per cent over the year with food prices down by 1.2 per cent.
• Annual changes of consumer goods: Food, alcohol & tobacco (-0.2 per cent); Clothing (+1.4 per cent); Rent, fuel, vehicles (+2.5 per cent); Household goods (+1.1 per cent); Transport & communication (+0.1 per cent); Education, culture & recreation (+2.5 per cent); Healthcare (+5.7 per cent); and Other goods and services (+2.8 per cent).

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.
• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th 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 10th 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?

• Cheaper petrol prices, coupled with the recent strength in employment, should support confidence and, in turn, retail spending.
• The Reserve Bank has no need to lift or cut rates as yet. Rate hikes are still more likely to come later in 2018.