East Coast petrol prices set to lift and diesel prices hit 22-week high

Weekly Petrol Prices; ANZ Job Ads; Monthly inflation gauge; China data

• Weekly Petrol Price: According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 1.2 cents in the past week to 145.6 cents a litre. But the national average diesel petrol price rose by 0.5 cents a litre to 150.6 cents a litre over the week – a 22-week high.
• Inflation: The Melbourne Institute monthly headline inflation gauge rose by 0.2 per cent in April. The gauge’s annual growth rate decelerated from 2.1 per cent in March to 1.8 per cent in April. The smoothed 12-month annual average of the gauge is at 1.9 per cent – the slowest growth rate since June 2017.
• Job advertisements: ANZ job advertisements fell for the sixth straight month, down by 0.1 per cent in April after falling by 1.7 per cent in March. Ads were down by 5.6 per cent over the year to 166,464.
• China Caixin/Markit services purchasing managers’ index: China’s Caixin/Markit private sector services purchasing managers’ index rose by 0.1 point to a 16-month high of 54.5 points (survey: 54.2 points) in April. A level above 50 denotes an expansion in activity.

The petrol figures have implications for retailers, especially petrol marketing groups. The job advertisements data is a leading indicator of the job market and therefore important for consumer-focussed stocks and companies such as SEEK. The inflation Gauge estimates month-to-month price movements for a wide-ranging basket of goods and services. The Chinese data have implications for the currency markets and therefore exporters and importers.

What does it all mean?

•  Unleaded petrol prices may have fallen for two weeks, but diesel prices are hovering just below two-year highs. And motorists in Sydney and Brisbane are well advised to fill up now. Both cities are currently into the 20th day of the current retail petrol discounting cycle. Unleaded pump prices in both cities are around $1.42 a litre.
• Melbourne unleaded petrol prices, however, have already begun lifting. Prices are now averaging around $1.48 a litre after the discounting cycle ended over the weekend, according to real-time data from MotorMouth and Informed Sources.
• East Coast unleaded petrol prices, therefore, are likely to land between $1.45-$1.50 in the next week, despite falling global crude oil prices. Last week, the Brent crude oil price fell by 1.8 per cent to US$70.85 a barrel and Nymex crude oil price fell by 2.1 per cent to US$61.94 a barrel. OPEC and Russian output curbs, US sanctions on Iran and Venezuela, and political upheaval in Nigeria and Libya have crimped supply.
• But oil prices faltered last week as US oil drillers increased the number of oil rigs in operation from 805 to 807. And overall US production rose by 100,000 barrels a day to 12.3 million, according to the Energy Information Administration.
• June pricing cuts by Saudi Arabia to the US and the ongoing US-China trade tensions are likely to weigh on crude oil prices in the near term. The Singapore benchmark gasoline price fell by the most in five months last week, signalling that petrol prices could be capped at $1.50 a litre in coming weeks, despite tensions with the domestic retail discounting cycle.
• Aussie consumer prices remain contained, which means that consumers remain in the ascendancy, despite rising petrol, transport and utility pricing pressures. The Bureau of Statistics doesn’t release monthly inflation data so the Melbourne Institute’s monthly gauge is the best read that we can get on goods and services prices. And the smoothed 12-month annual average of the gauge printed at 1.9 per cent in April – the slowest growth rate in almost two years.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 1.2 cents to 145.6 cents a litre in the past week.
• The metropolitan petrol price fell by 2.7 cents to 144.8 cents per litre, but the regional price rose by 1.8 cents to 147.1 cents per litre.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 5.2 cents to 144.4 c/l), Melbourne (down by 1.7 cents to 142.4 c/l), Brisbane (down by 7.2 cents to 144.5 c/l), Adelaide (up by 0.9 cents to 143.8 c/l), Perth (up by 3.1 cents to 151.0 c/l), Darwin (up by 0.2 cents to 144.9 c/l), Canberra (up by 1.1 cents to 146.1 c/l) and Hobart (up by 0.7 cents to 152.9 c/l).
• The smoothed gross retail margin for unleaded petrol fell from 11.40 cents a litre to 10.58 cents a litre last week (annual average 13 cents a litre).
• The national average diesel petrol price rose by 0.5 cents a litre to 150.6 cents a litre over the week. The metropolitan price rose by 0.3 cents to 149.7 cents a litre with the regional price up by 0.6 cents to 151.3 cents a litre.
• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 137.4 cents a litre, down by 0.8 cents over the week. The terminal gate diesel price stands at 139.5 cents a litre, down by 0.9 cents over the past week.
• Last week, the key Singapore gasoline price fell by US$3.90 or 4.7 per cent – the biggest fall in five months – to US$78.70 a barrel. In Australian dollar terms, the Singapore gasoline price fell by $3.47 or 3 per cent last week – also the largest fall in five months – to $112.46 a barrel or 70.73 cents a litre.
• MotorMouth records the following average retail prices for capital cities today: Sydney 141.4c; Melbourne 148.3c; Brisbane 141.7c; Adelaide 160.2c; Perth 142.5c; Canberra 146.9c; Darwin 144.9c; Hobart 153.1c.

Inflation

• The Melbourne Institute monthly headline inflation gauge rose by 0.2 per cent in April. The gauge’s annual growth rate decelerated from 2.1 per cent in March to 1.8 per cent in April. The smoothed 12-month annual average of the gauge is at 1.9 per cent – the lowest level since June 2017.
• The trimmed mean gauge rose by 0.1 per cent in April after a 0.4 per cent lift in March. The gauge’s annual growth rate decelerated from 1.6 per cent in March to 1.3 per cent in April – the weakest growth rate since November 2018.

Job advertisements

• ANZ job advertisements fell by 0.1 per cent in April (the sixth straight decline) after falling by 1.7 per cent in March. Ads are down by 5.6 per cent on the year. Ads hit 7-year highs in May 2018.

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 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.
• Melbourne Institute have developed a monthly inflation indicator to give markets and policy makers a monthly update on inflation trends. Based on the ABS methodology for calculating the quarterly consumer price index, the Melbourne Institute Monthly Inflation Gauge estimates month-to-month price movements for a wide-ranging basket of goods and services across the main capital cities of Australia. This report is produced monthly and is released with a lag of one month.
• Caixin/Markit releases the Chinese purchasing manager indexes at the beginning of each month. China is Australia’s largest trading partner and changes in the Chinese economy have major implications for the Aussie economy.

What are the implications for interest rates and investors?

•   It’s a frustrating time for Aussie motorists. Crude oil prices have fallen to near five-week lows, but unleaded petrol pump prices are set to lift as the discounting cycle ends on the East Coast.
• Tomorrow’s Reserve Bank interest rate meeting is finely balanced. Sluggish economic growth is being counterbalanced by still-solid jobs growth. But part of the Bank’s policy mandate is price stability. And ‘underlying’ measures of consumer prices remain well below policymaker’s 2-3 per cent target. In fact, the annual growth rate of the trimmed mean measure of the Melbourne Institute’s monthly inflation gauge implies little upside ahead.
• Wages growth is expected to lift at an annual growth rate of 2.4 per cent in the March quarter, according to Commonwealth Bank Group economists. With the annual growth rate of the Melbourne Institute headline inflation gauge decelerating from 2.1 per cent in March to 1.8 per cent in April, real wages growth is set to remain positive.
• Trade tensions between the US and China ratcheted up a notch today. The brinkmanship on tariffs will unsettle investors in the near term. And the timing couldn’t be worse for China. Manufacturing and services sector activity gauges have stabilised after a ‘soft patch’ in late 2018 and early 2019. Caixin’s services index is at 16-month highs with employment expanding for seven consecutive months.
• In Australia, CommSec expects the official cash rate to be unchanged for the foreseeable future. But risks are very much tilted to rate cuts.