Record lift in petrol price. Trade surplus soars.

Record lift in petrol price. Trade surplus soars.

Petrol Prices; Preliminary trade; Used vehicle market

Fuel prices: The national average price of unleaded petrol rose by a record 14.4 cents a litre last week to 134.0 cents a litre according to the Australian Institute of Petroleum. But petrol prices are now easing in Sydney, Melbourne, Brisbane and Adelaide from the high points of discounting cycles.

Preliminary merchandise trade: In original terms, the value of exports of goods rose by 16.3 per cent in December to be up 2.5 per cent higher than a year ago. The value of goods imported fell by 8.8 per cent in December to be 0.1 per cent lower than a year ago. The goods trade surplus was $8.956 billion – the fourth highest on record.

Used car prices: According to Datium Insights, used vehicle prices fell 1.0 per cent last week (based on Pickles auction data) with lease company vehicle prices down the most (-2.4 per cent).

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. The trade data is instructive on income flows in the economy and consumer and business activity and has implications for the currency. Used car price data is useful in gauging activity levels in the motor vehicle market.

What does it all mean?

• It’s a record, but not one to celebrate. Last week the average price of unleaded petrol rose by a record 14.4 cents a litre. There hasn’t been a bigger jump in 17 years of records. In an alignment of the planets, pump prices rose in Sydney, Brisbane, Adelaide and Melbourne by around 20-26 cents a litre.

• What should petrol prices have lifted by last week? Based on regional and wholesale prices, pump prices should have lifted around 2-3 cents a litre (in fact Perth prices rose 2.4 cents a litre). But the modest lift in global prices has occurred at the same time as the end of so-called discounting cycles in major capital cities.

• The good news is that capital city pump prices are easing from cyclical highs of the discounting cycle. Prices are falling quickly in Adelaide but only slowly in Sydney, Melbourne and Brisbane. Over the next 2-3 weeks, pump prices should fall by around 25-30 cents a litre. So motorists should top up rather than fill up with prices just off cyclical highs.

• Global oil prices were reasonably steady last week. Rising Covid-19 case numbers are balanced against hopes that vaccine rollouts can bring to an end the need for lockdowns.

What do you need to know?

Weekly petrol prices

• Last week the national average price of unleaded petrol rose by a record 14.4 cents a litre to 134.0 cents per litre (c/l) according to the Australian Institute of Petroleum. Metropolitan prices rose by 19.7 cents to 138.8 c/l while regional prices rose 3.7 cents to 124.2 c/l.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 22 cents to 141.0 c/l), Melbourne (up by 26.2 cents to 145.4 c/l), Brisbane (up by 22.9 cents to 140.6 c/l), Adelaide (up by 20.5 cents to 137.4 c/l), Perth (up by 2.4 cents to 124.0 c/l), Darwin (up by 0.8 cents to 119.2 c/l), Canberra (up by 1.7 cents to 125.4 c/l) and Hobart (up 1.1 cents to 125.8 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol rose from a 6-month low of 15.36 cents a litre to 16.01 cents per litre (24-month average: 15.1 cents a litre).

• The national average diesel petrol price rose by 1.2 cents to 122.6 cents a litre over the past week. The metropolitan price lifted 1.1 cents to 121.5 cents a litre and the regional price was up 1.2 cents to 123.5 cents a litre.

• Last week, the national average unleaded Terminal Gate Price (TGP) was up 1.8 cents to 112.4 cents a litre. The terminal gate diesel price lifted 2.1 cents to 112.0 cents a litre.

• Today, the average unleaded TGP stands at 112.4 cents a litre, up by 0.1 cents over the week. The terminal gate diesel price stands at 112.1 cents a litre, up 0.8 cents a litre over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 145.0c/l; Melbourne 151.3c/l; Brisbane 150.7c/l; Adelaide 125.8c/l; Perth 113.0c/l; Hobart 126.0c/l; Darwin 119.3c/l; and Canberra 125.7c/l.

• Last week the key Singapore gasoline price fell by US34 cents or 0.6 per cent from 11-month highs to US$60.13 a barrel. In Australian dollar terms, the Singapore gasoline price fell by 24 cents or 0.3 per cent to $77.63 a barrel or 48.82 cents a litre.

Preliminary international trade – December

• According to the Bureau of Statistics (ABS), in original terms, the value of exports of goods rose by 16.3 per cent to $34.9 billion. Exports are 2.5 per cent higher than a year ago.

• The value of goods imported fell by 8.8 per cent to $25.97 billion. Imports are 0.1 per cent lower than a year ago.

• The goods trade surplus was $8.956 billion – the fourth highest on record – and up $7.4 billion from November.

• In the year to December the goods trade surplus (exports less imports) was $69.7 billion, up from $68.8 billion in November but off the record high of $87.3 billion in the year to November.

• On exports, the ABS noted: “The main drivers were increases to metalliferous ores, cereals and coal. Metalliferous ores was up $2.8 billion (22 per cent), 82 per cent of which was iron ore, which was up $2.2 billion (21 per cent) to $12.5 billion.

• The increase in cereals was driven by wheat, up $604 million (423 per cent) and barley, up $182 million (254 per cent). Strong growing conditions in Australia’s wheatbelt, and lower than average rainfall in the Black Sea growing region has driven demand for Australian wheat to record highs.

• Driving the coal increase was hard coking coal, up $501 million (38 per cent). While hard coking coal exports to China have diminished since mid-2020, increased exports to India, Japan and South Korea have offset some of the fall.”

• On imports the ABS noted: “This decrease was most evident in transport equipment, down $1 billion (74 per cent) and telecommunications and sound equipment, down $511 million (23 per cent).

• Offsetting the decreases were specialised machinery, up $132 million (13 per cent) and road vehicles, up $66 million (2 per cent) to $3.7 billion.

• “Carrying on the trend through the second half of this year, we continue to see a rise in road-vehicle imports with December recording the highest monthly value, surpassing the previous record set in June 2018. Despite the record December, imports for the 2020 calendar year are the lowest since 2015, highlighting the pandemic’s impact on the imports of motor vehicles in early 2020.”

• Australia’s annual exports to China rose from $145.14 billion in November to $145.19 billion in December. Exports to China are down 2.1 per cent on a year ago.

• Australia’s annual imports from China rose from $82.89 billion in November to $84.44 billion in December. Annual imports were up 6.5 per cent on a year ago.

• Australia’s rolling annual trade surplus with China fell from $62.25 billion in November to a 17-month low of $60.75 billion in December.

• China accounts for 40 per cent of Australian exports while China accounts for 28.8 per cent of all Australian imports.

Used vehicle market

• Datium Insights have reported the following results for the past week:

“Prices were down the past week (-1.0 per cent) with Corporations (+6.3 per cent).

Supply was down (-16.9 per cent).

Clearance rates slightly increased (+0.3 per cent).

Prices for top 15 traded vehicles were mixed with the Subaru Forester (+3.3 per cent) seeing the largest increase and Toyota Hiace (-4.1 per cent) seeing the largest decrease.

Stock still remains considerably low.”

• In terms of prices, general government fell 1.2 per cent with lease company vehicle prices down 2.4 per cent. Light commercial vehicle prices fell 0.5 per cent with passenger cars down 0.1 per cent and SUVs down 0.5 per cent.

What is the importance of the economic data?

• Weekly petrol prices data 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 International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.

• Data analytics firm, Datium Insights, provides a weekly report on the used vehicle market. The data assists in gauging the strength of a key component of consumer spending and provides insights on the Autos and components sector of the sharemarket.

What are the implications for investors?

• The spike in petrol prices has potential to dampen consumer sentiment and spending at a time when people need to be spending to boost economic activity. Petrol prices are now retreating from highs, but the slow nature of the declines could impact retail activity. Filling up the car with petrol is the single biggest weekly purchase for most families.

• Global oil prices have lifted from lows, but are still way off the highs set in late 2019. In terms of prices, much depends from here on vaccine roll-outs and the suppressing of virus cases across the globe.

• Australia’s healthy trade surplus will keep the Aussie dollar supported above US77 cents with implications for exporters and importers.

Published by Craig James, Chief Economist, CommSec