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Diesel prices hit 4-year highsPetrol prices; Job advertisements; China data
Diesel price: According to the Australian Institute of Petroleum (AIP), the national average retail diesel petrol price rose by 1.6 cents to 160.4 cents a litre over the week – the highest level in four years.
Unleaded petrol price: The national average Australian price of unleaded petrol fell by 1.2 cents to 155.8 cents a litre – the second highest level in four years – according to the AIP.
Job advertisements: ANZ job advertisements fell by 0.8 per cent in September after declining by a revised 0.7 per cent (previously -0.6 per cent) in August. Job ads were up 4.7 per cent on a year ago. The number of jobs advertised (seasonally adjusted) was 177,555 in September, down 1.8 per cent from the 7-year high of 178,787 set in May.
China purchasing manager index: The Caixin Services Purchasing Managers’ Index (PMI) rose from 51.5 to 53.1 in September, above market forecasts for 51.4. Results above 50 points imply expanding activity. 
What does it all mean?
Parts of rural Australia may have received some much-needed rain last week, but the cost of doing business on the land continues to increase. Already under pressure from the drought, diesel prices – one of the biggest input costs for farmers – have hit four-year highs.
Unleaded petrol prices are just below last week’s four-year high, but are still at the second highest level since July 2014. Pump prices are hovering around $1.60 a litre across the country. And there is unlikely to be any near-term respite for motorists returning home from the school holidays. The weaker Aussie dollar is increasing the cost of imported crude oil (purchased in US dollars) with the benchmark Singapore gasoline price also at fresh four-year highs. Household budgets are continuing to be stretched.
Leading indicators of jobs growth, such as the ANZ job advertisements gauge, have eased from seven-year highs, but continue to signal that the Aussie labour market is in good health. Measures of unemployment are at the lowest in 4-6 years. There is still some spare capacity in the labour market, but further job gains are expected, especially with the Bureau of Statistics’ job vacancies measure at record highs.
China continues to pivot its economy towards higher-valued services in finance and technology. While industrial production and fixed asset investment have slowed, China’s services sector grew at its fastest pace in three months during September. Activity was led higher by new business orders, despite the ongoing trade dispute with the US. But the employment sub-index fell to 49 points in September – its first contraction in two years – and Chinese businesses reported greater fuel, raw material and wages costs pressures during the month.
What do the figures show?Petrol prices
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 1.2 cents to 155.8 cents a litre in the past week – the second highest level in four years.
The metropolitan petrol price fell by 2.2 cents to 155.3 cents per litre, but the regional price rose by 0.7 cents to 156.9 cents per litre. The gross retail margin rose by 0.4 cents to 12.00 cents a litre.
Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 7.0 cents to 154.1 c/l), Melbourne (down by 4.4 cents to 158.7 c/l), Brisbane (down by 2.7 cents to 149.3 c/l), Adelaide (up by 11.8 cents to 158.3 c/l), Perth (up by 1.8 cents to 155.1 c/l), Darwin (up by 1.3 cents at 158.4 c/l), Canberra (up by 2.5 cents to 162.8 c/l) and Hobart (up by 1.4 cents to 162.1 c/l).
Today, the national average wholesale (terminal gate) unleaded petrol price stands at 145.8 cents a litre, up by 2.8 cents over the week to 4-year highs. The terminal gate diesel price stands at 151.3 cents a litre – a 4½-year high – up by 4.3 cents over the past week.
The national average diesel petrol price rose by 1.6 cents to 160.4 cents a litre over the week. The metropolitan price rose by 1.4 cents to 160.8 cents a litre with the regional price up by 1.7 cents to 160.1 cents a litre.
Last week the key Singapore gasoline price rose by US$1.95 or 2.1 per cent to near 4-year highs of US$93.50 a barrel. In Australian dollar terms, the Singapore gasoline price rose by $5.58 or 4.4 per cent last week to a 4-year high of $132.34 a barrel or 83.23 cents a litre.
MotorMouth records the following average retail prices for capital cities today: Sydney 150.7c; Melbourne 156.1c; Brisbane 154.3c; Adelaide 166.8c; Perth 149.5c; Canberra 163.3c; Darwin 159.0c; Hobart 163.4c.
Job advertisements
ANZ job advertisements fell by 0.8 per cent in September after declining by a revised 0.7 per cent (previously – 0.6 per cent) in August. Job ads were up 4.7 per cent on a year ago. The number of jobs advertised (seasonally adjusted) was 177,555 in September, down 1.8 per cent from the 7-year high of 178,787 set in May. In trend terms job ads fell by 0.1 per cent in September to be up 4.9 per cent on a year ago.
According to ANZ, “Job ads have essentially tracked sideways since they jumped sharply at the start of this year. The level of job ads is still consistent with ongoing employment growth, but at a level that stabilises the unemployment rate rather than pushes it lower. Other indicators of jobs growth are more positive, however, such as the ABS job vacancies series. This suggests to us that the unemployment rate will most likely head lower overtime. This is critical to our expectation that the economy can navigate through a period of falling house prices without getting derailed. A marked decline in ANZ job adswould be a negative signal in this regard. So far that has been avoided.”
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 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.
Caixin releases its 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?
Brent crude oil surged to four-year highs of US$86 a barrel in London trading last week, but has eased a little in recent days. Over the weekend, Saudi Arabia’s Crown Prince Mohammed bin Salman, pledged to increase production by around 1.3 million a day to offset expected declines in Iranian crude exports due to looming US sanctions.
It is hoped that a lift in OPEC and Russian crude output will eventually rebalance the oil market, placing downward pressure on oil prices. However, this is of little comfort to Aussie households paying around $1.60 per litre at the pump for both unleaded petrol and diesel prices – about the most in four years. The impact of rising petrol prices on headline consumer prices will be something to look out for later this month when the Bureau of Statistics releases its inflation data for the September quarter.
ANZ jobs ads are just below the highest level in seven years set just a few months ago. The outlook for job creation remains positive, but all eyes will be on tomorrow’s NAB business survey. The employment sub-index has lifted for three successive months and the August reading was the highest since April. Labour costs also lifted in August, implying nascent wages pressures. Of course, jobs and wages growth remains critical to the outlook for household consumption, which is still holding up in the face of cost of living headwinds.
China’s services sector grew in September, defying expectations for an easing in activity. The combined easing of fiscal policy (which boosted construction activity in the sector) and the People’s Bank of China’s cut to lenders’ required reserve ratio (the amount of cash lenders must hold on reserve) yesterday, is a further sign that Chinese policymakers are trying to engineer a soft landing for the economy in the face of growing US trade tensions. Economic growth (GDP) data for the September quarter will be much anticipated when released on October 19.
CommSec expects interest rates to remain unchanged until late 2019.
Publisehd by Ryan Felsman, Senior Economist, CommSec