Record profits; Petrol slides most in a decadeJob Ads; Weekly Petrol prices; Business Indicators
Profits: Company operating profits rose by 1.9 per cent in the September quarter to stand 13.5 per cent up on the year. Profits in the year to September were up 13.2 per cent on a year earlier.
Petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 3.8 cents to 134.1 cents a litre.
Building approvals: Approvals to build new homes fell 1.5 per cent in October. But private house approvals rose by 2.7 per cent. Home building is the best in around a decade in Hobart.
Job advertisements: ANZ job advertisements fell by 0.3 per cent in November but ads are still only 1.7 per cent away from the 7-year high set in May.
What does it all mean?
Corporate Australia looks set to drive the economy over the coming year. Profits are at record highs. And – as we saw last week – investment expectations have lifted sharply in the past three months.
The job ads data may not be picking up the new hiring trends such as candidates going straight to prospective employer websites or using social media sites such as LinkedIn.
Home building activity is in the process of moving to more sustainable levels – just like home prices in Sydney and Melbourne.
Discounting cycles may be shifting but there is still good news for motorists – at least for now. The Singapore gasoline price and terminal gate (wholesale) prices have both fallen 31 cents a litre and the national pump price has only eased 26 cents from the highs. So cheaper prices are still possible in the next fortnight. Prices near $1.10 a litre can’t be ruled out for the biggest petrol discounters.
The 26-cent fall in pump prices is the biggest for a five week period recorded in a decade.
Perversely the US-China trade truce may serve to lift global oil prices as may the OPEC oil ministers meeting on Thursday. Aussie pump prices could lift in the New Year.
What do the figures show?Petrol prices
According to the Australian Institute of Petroleum the national average price of unleaded petrol fell by 3.8 cents a litre last week to 134.1 cents a litre.
The metropolitan petrol price fell by 3.6 cents to 129.1 cents per litre, and the regional price fell by 4.0 cents to 144.2 cents per litre. The gross retail margin fell by 0.5 cents to 14.1 cents a litre – still above the 13.5 cent average over the past year.
Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 2.3 cents to 123.5 c/l), Melbourne (down by 4.4 cents to 125.7 c/l), Brisbane (up by 4.3 cents to 130.3 c/l), Adelaide (down by 25.6 cents to 125.3 c/l), Perth (down by 2.2 cents to 137.2 c/l), Darwin (down by 0.5 cents to 153.1 c/l), Canberra (down by 1.7 cents to 158.7 c/l) and Hobart (down by 2.9 cents to 159.1 c/l).
Today, the national average wholesale (terminal gate) unleaded petrol price stands at 116.2 cents a litre, down by 5.7 cents over the week. The terminal gate diesel price stands at 128 cents a litre, down by 6.4 cents over the past week. The wholesale unleaded price has fallen 31 cents a litre from recent highs.
The national average diesel petrol price fell by 2.7 cents to 159.5 cents a litre over the week. The metropolitan price fell by 2.7 cents to 159.7 cents a litre with the regional price down by 2.7 cents to 159.3 cents a litre.
Last week the key Singapore gasoline price fell by US$3.65 or 5.7 per cent to US$60.90 a barrel – the lowest level in 16 months. In Australian dollar terms, the Singapore gasoline price fell by $5.79 or 6.5 per cent last week to $83.24 a barrel or 52.35 cents a litre – the lowest level in 15 months. Over the past seven weeks, Singapore gasoline has fallen almost 31 cents a litre in Australian dollar terms.
MotorMouth records the following average retail prices for capital cities today: Sydney 126.9c; Melbourne 131.6c; Brisbane 145.8c; Adelaide 119.1c; Perth 123.3c; Canberra 158.5c; Darwin 152.6c; Hobart 158.8c.
ANZ job advertisements fell by 0.3 per cent in November after rising by 0.3 per cent in October. Job ads are up 2.3 per cent on a year ago. The number of jobs advertised (seasonally adjusted) was 175,726 in November, just 1.7 per cent down from the 7-year high of 178,768 set in May. In trend terms job ads fell 0.2 per cent in November to be up 2.9 per cent on a year ago.
Company operating profits rose for the fourth straight quarter, up 1.9 per cent in the September quarter. Profits were up 13.5 per cent on the year.
Profits rose in 9 of the 15 industry groups in the September quarter. Profits rose most in Accommodation and food services (up 13.4 per cent) but fell most in “Other Services” (down 8 per cent).
In the year to September, profits hit a record high of $346.1 billion, up 13.2 per cent on a year earlier.
In rolling annual terms, mining operating profits rose by 13.2 per cent for the year to September to a record high of $123 billion. Non-mining profits rose by 6.5 per cent to a record $223.1 billion.
Unincorporated gross operating profits rose by 3.0 per cent in the September quarter after falling 0.7 per cent in the June quarter. Business gross operating profits rose for the fourth straight quarter, up 2 per cent. Company profits before tax rose by 6.7 per cent in the September quarter after rising 9.9 per cent in the June quarter.
Inventories were largely flat in the September quarter. Retail stocks rose 2.3 per cent while other stocks fell – Accommodation and food services fell the most, down 3.3 per cent.
Sales rose in 9 of the 15 industry sectors in the September quarter. Sales rose the most in Rental, hiring and real estate services and Administrative and support services (both up 2.8 per cent). Sales fell most in Information media and telecommunications (down 1.5 per cent).
The total value of sales rose by 0.1 per cent in the September quarter to be up 1.6 per cent over the year (decade average 1.4 per cent). Over the year to September, sales were up 2.7 per cent on a year earlier, down from 3.2 per cent in the June quarter, which was the strongest growth in 9½ years.
In current prices, sales rose in seven states and territories in the September quarter: NSW (up 1.2 per cent), Victoria (up 1.4 per cent), Queensland (up 1.8 per cent), South Australia (down 0.5 per cent), Western Australia (up 0.6 per cent), Tasmania (up 3.2 per cent); Northern Territory (up 1.3 per cent) and ACT (up 7.6 per cent).
Wages & salaries (includes changes in wages and employment) rose by 0.9 per cent in the September quarter to be up 4.3 per cent on the year.
Council approvals to build new homes fell by 1.5 per cent in October after rising by 5.5 per cent in September Approvals are down by 13.4 per cent over the year.
House approvals rose by 1.7 per cent in October (first gain in four months), but apartment approvals fell by 5.4 per cent.
In trend terms, overall approvals fell by 1.1 per cent. House approvals fell by 0.5 per cent and apartment approvals were down by 1.9 per cent.
Over the past year 222,696 new homes were approved, down from the record high of 242,779 in the year to August 2016.
Dwelling approvals across states/territories in October: NSW (down 0.5 per cent); Victoria (down 2.6 per cent); Queensland (down 1.1 per cent); South Australia (down 17 per cent); Western Australia (down 0.1 per cent); Tasmania (down 3.0 per cent). Trend terms: Northern Territory (down 12.5 per cent); ACT (up 0.8 per cent).
The value of all commercial and residential building approvals rose by 2.8 per cent in October but were still down 16.7 per cent on the year. Residential approvals rose by 2.1 per cent; new building was up by 2.3 per cent; and alterations & additions rose by 0.5 per cent. Commercial building rose by 4.0 per cent in October.
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.
The quarterly Business Indicators publication by the Bureau of Statistics contains measures such as inventories, company profits and income from sales. Higher inventory (stock) levels can be either intentional or unintentional. If stocks are low and sales are expected to rise in the future, businesses will seek to build up stocks. However an unintentional build-up in stocks is where sales fall short of expectations, leaving more goods on the shelves than desired. If profits are increasing then this may point to increased capital spending and employment in the future. Rising profits are also a sign of favourable business conditions.
The Bureau of Statistics’ monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.
What are the implications for interest rates and investors?
The pulse of the economy remains strong. Export and local sales are rising, businesses are lifting profits and, in turn, they are hiring more workers and investing.
Petrol prices should stay low in the next few weeks, boosting the spending potential for Aussie consumers and cheering retailers. Filling up the car with petrol is the single biggest weekly purchase for most households.
Housing markets vary across the nation. The weak level of home building in the Northern Territory is a concern. However home building is soaring in Hobart. Two cities are poles apart in distance and housing market conditions.
CommSec expects interest rates to be unchanged until later in 2019. But costs pressures such as higher wages need to be watched carefully.
Published by Craig James, Chief Economist, CommSec
Record profits; Petrol slides most in a decadeJob Ads; Weekly Petrol prices; Business Indicators