Strongest rise in job ads in 8 yearsWeekly petrol prices; New vehicle sales; Job ads; Services sector survey
Petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 3.2 cents to 136.7 cents a litre in the past week – the biggest decline in six weeks.
Vehicle sales: According to the Federal Chamber of Automotive Industries (FCAI), new vehicle sales hit a record high of 1,210,667 units in the year to January, up by 2.7 per cent on a year ago.
Job advertisements: Job advertisements rebounded strongly in January, rising by 6.2 per cent to 177,961 ads, after falling by a downwardly-revised 2.7 per cent in December (previously reported as -2.3 per cent). It was the strongest monthly lift in ads almost eight years. Job ads are up by 13.8 per cent on a year ago and are at 6½-year highs.
CBA services gauge: The CBA Purchasing Manager’s Index (PMI) for the services sector eased to 53.8 in January from 55.1 in December, following a solid rise in the December quarter. A reading over 50 signifies services sector expansion.
AiGroup services performance: The Australian Industry Group (AiG) Australian Performance of Services Index (PSI) rose by 2.9 points to 54.9 in January – the eleventh consecutive month of expansion.
What does it all mean?
Aussie businesses are having a great start to the year. Business conditions are the best in 9½ years and profits are just shy of record high levels. Confidence is improving. Small and medium sized enterprises (SMEs) are the growth engine of the Aussie economy and activity is expanding, supporting buoyant jobs growth.
The employment sub-index of the AiGroup gauge has lifted to its highest level in 13 years. Most notably, survey respondents reported an increase in the emergence of skills shortages in specialised occupations.
And the news keeps on getting better for Aussie job seekers. Job ads placed by businesses jumped by the most in almost eight years at the beginning of 2018.
Car prices are at 30-year lows. And Aussies are taking advantage of discounting at dealerships to buy new vehicles. Car sales are at record highs. Roy Morgan’s leading indicator on new vehicle buying intentions is just below a 15-year high, pointing to further growth.
In more good news, petrol prices fell across the country for the first time in six weeks.
Retail petrol margins declined further during the first week of February. Last week the five-week average gross retail margin (gap between the pump and terminal gate price) declined to 14.32 cents a litre – the lowest level in nine weeks.
Across capital cities the discounting cycles are approaching peaks in Sydney and Adelaide with pump prices at three month lows. The discounting cycle has commenced in both Melbourne and Brisbane. Prices remain stubbornly high in Hobart, Darwin and Canberra.
What do the figures show?
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 3.2 cents to 136.7 cents a litre in the past week – the biggest decline in six weeks. The metropolitan petrol price declined by 4.4 cents to 135.5 cents per litre and the regional price decreased by 0.8 cents to 139.1 cents per litre.
Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 4.0 cents to 126.8 c/l), Melbourne (down by 5.8 cents to 140.7 c/l), Brisbane (down by 6.3 cents to 141.6 c/l), Adelaide (down by 4.2 cents to 121.7 c/l), Perth (down by 0.4 cents to 137.4 c/l), Darwin (down by 0.3 cents to 149.9 c/l), Canberra (unchanged at 148.4 c/l) and Hobart (up by 0.1 cents to 146.5 c/l).
The national average Australian price of diesel petrol rose by 0.1 cents to 139.1 cents per litre. The metropolitan price rose by 0.1 cents to 139.7 c/l and the regional average price was unchanged at 138.5 c/l.
Today, the national average wholesale (terminal gate) unleaded petrol price stands at 124.1 cents a litre, up by 0.6 cents over the week. The terminal gate diesel price stands at 126.4 cents a litre, up by 0.6 cents over the past week.
Last week the key Singapore gasoline price rose by US$2.35 or 2.9 per cent to US$82.70 a barrel. In Australian dollar terms the Singapore gasoline price last week rose by $4.14 or 4.2 per cent to $103.41 a barrel or 65.04 cents a litre – the highest level in 2½ years.
MotorMouth records the following average retail prices for capital cities today: Sydney 125.4c; Melbourne 137.4c; Brisbane 137.9c; Adelaide 121.3c; Perth 127.7c; Canberra 148.4c; Darwin 150.5c; Hobart 146.4c.
New vehicle sales
According to the Federal Chamber of Automotive Industries (FCAI), new vehicle sales hit a record high of 1,210,667 units in the year to January, up by 2.7 per cent on a year ago.
According to Roy Morgan’s New Vehicle Purchase Intention Survey, over the three months to November 2017: “Some 2.38 million Australians intend to purchase a new vehicle in the next four years. This is an increase of 142,000 over the same period last year and has left intentions only marginally lower than the fifteen year high recorded in February 2017.”
Job advertisements rebounded strongly in January, rising by 6.2 per cent to 177,961 ads, after falling by a downwardly-revised 2.7 per cent in December (previously reported as -2.3 per cent). It was the strongest monthly lift in ads almost eight years. Job ads are up by 13.8 per cent on a year ago and are at 6½-year highs.
According to ANZ: “The bounce in January is in line with ongoing strength in business conditions, capacity utilisation and other surveys of employment conditions.” CBA Purchasing Managers Index for Services
The Commonwealth Bank Purchasing Managers Index (PMI) for services eased to 53.8 in January from 55.1 in December, following a solid rise in the December quarter. Readings above 50 signal an improvement in business activity on the previous month, while readings below 50 show deterioration.
The CBA reported: “The rate of expansion in the Australian services sector slowed a little early in 2018. But service providers remain strongly positive on the outlook for the year ahead. More than two-thirds of respondents expect a lift in activity.”
And also: “Despite the slower pace of expansion in January, capacity pressures continued to rise. The Outstanding Business Index, for example, remains well above average levels. These pressures are playing out in a positive way in the labour market and payrolls are expanding with business growth. But, as with the earlier Manufacturing PMI, some panellists are indicating that rising cost burdens are being passed on down the pricing chain.” AiGroup Performance of Services Index
The Australian Industry Group (AiG) Australian Performance of Services Index (PSI) rose by 2.9 points to 54.9 in January – the eleventh consecutive month of expansion. PSI results above 50 points indicate expansion, with higher numbers indicating stronger rates of growth.
The AiG reported: “Respondents noted improved business confidence and orders from businesscustomers in January, boosted by a rebound in real estate transactions in some locations. Excessive heat was a plus for some businesses, as more customers sought out air-conditioned shops, restaurants and recreation services”.
And also: “Businesses across all sub-sectors continue to report problems absorbing higher input costs including higher energy costs and annual increases in regulatory costs. These cost rises are eating into margins and increasing pressure to raise selling prices”.
Four of the five activity sub-indexes in the Australian PSI rose during January:
• Supplier deliveries fell by 4.8 points to 53.7;• Stocks (inventories) rose by 1.7 points to 52.5;• Employment rose by 5.4 points to 58.1;• New orders rose by 3.5 points to 54.5; and• Sales rose by 4.8 points to 53.9.
Two of the three prices sub-indexes in the PSI increased in January:
• Input prices fell 3.0 points to 60.7;• Selling prices rose by 6.6 points to 51.8;• Average wages rose by 1.4 points to 57.5.
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 Federal Chamber of Automotive Industries releases estimates of car sales on the third business day of the month. The figures highlight the strength of consumer spending as well as conditions facing auto & components companies.
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.
The CBA Purchasing Manager indexes (PMIs) and Australian Industry Group (AiG) AustralianPerformance of Services Index (PSI) for services and manufacturing are released each month. The Australian PMIs are the local equivalents of similar indexes released for other countries. The PMIs are amongst timeliest economic indicators released in Australia. The PMIs are useful not just in showing how the sectors are performing but in providing some sense about where they are heading. The key ‘forward looking’ components are orders and employment.
What are the implications for interest rates and investors?
The services sector is generating the lion’s share of Aussie jobs. Conditions are the best in a decade for businesses. The profitability of listed corporates will be closely observed during the reporting season. If earningsand confidence pick-up further, the jobs market will remain strong. Hiring intentions point to further jobs growth.
Aussies may be wary of debt and are not taking out personal loans. And we’ve stopped manufacturing cars. However, sales of new utes and SUVs continue to reach record highs. And we look set to continue our love affair with the Toyota Hilux and Ford Ranger based on current purchasing intentions.
Some respite at the bowser at last. Petrol prices fell across most parts of the country last week. Prices do remain high in the territories and Hobart, pressuring household budgets in these regions. Some energy analysts are forecasting oil prices to rise further as OPEC limits supply. As always, consumers are encouraged to monitor fuel price smart phone apps such as MotorMouth, Fuel Check and MyNRMA for the best prices when filling-up.
CommSec expects interest rates to be unchanged until at least December.
Originally published by Ryan Felsman, Senior Economist, CommSec
Strongest rise in job ads in 8 yearsWeekly petrol prices; New vehicle sales; Job ads; Services sector survey