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Biggest fall in petrol prices in 6 months

Aussie annual inflation growth hits 2-year low
Weekly petrol prices; Inflation gauge; China data

Petrol: According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 5.4 cents in the past week to 138.5 cents a litre. It was the biggest weekly decline in prices in 6 months.

Inflation: The Melbourne Institute monthly headline inflation gauge was flat for a second successive month in June. The gauge’s annual growth rate decelerated from 1.7 per cent in May to 1.6 per cent in June. The smoothed 12-month annual average of the gauge is at 1.8 per cent – the slowest growth rate in over two years.

China Caixin/Markit purchasing managers’ index: China’s Caixin/Markit private sector manufacturing purchasing managers’ index fell by 0.8 points to 49.4 points (consensus: 50.1 points) in June – the lowest level since January. A level below 50 denotes a contraction in activity.

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. 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?

• Good news. The July school holidays have kicked-off across the country and unleaded petrol prices have fallen by the most since December 23. Big falls in pump prices were recorded in Adelaide, Brisbane and Sydney, down by 13-21 cents a litre last week.

• In fact, motorists in Brisbane and Sydney can expect to pay $1.30-$1.40 a litre for unleaded petrol as they head-off to the beach or ski fields today, according to real-time fuel data from MotorMouth and Informed Sources. And prices are likely to fall further as the discounting cycle continues.

• But Melburnians won’t be so chipper. Unleaded pump prices began lifting last week and are now up 16 cents a litre to near $1.43 a litre today. With prices increasing, motorists are well advised to consult real-time fuel price apps, such as MotorMouth, and shop around for the best deals on fuel.

• Developments in global crude oil markets can also influence Aussie pump prices. In June, the US Nymex oil price rose by 9.3 per cent and the benchmark Brent crude oil price rose by 3.2 per cent. It was the biggest monthly lift in crude prices since January due to concerns over supply following escalating tensions in the Middle East.

• And it’s a big week for oil observers with OPEC, Russia and a wider coalition (‘OPEC+’) of energy and petroleum ministers expected to ‘rubber-stamp’ continued crude production cuts when they meet in Vienna from Tuesday.

• On the weekend, Russian President Vladimir Putin agreed with Saudi Crown Prince Mohammed Bin Salman to extend the current OPEC+ oil production cuts for another 6-9 months at the G20 Summit.

• Following the OPEC+ and US-China trade truce announcements, US WTI crude oil futures prices for August settlement jumped by almost 3 per cent to a 5-week high. Prices are now up by 11 per cent over the past two weeks in an ominous sign for motorists.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 5.4 cents in the past week to 138.5 cents a litre. The metropolitan price fell by 8.2 cents to 137.2 cents a litre, but the regional price rose by 0.3 cents to 141.1 cents a litre.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 14.3 cents to 138.4 c/l), Melbourne (down by 0.2 cents to 130.4 c/l), Brisbane (down by 13.1 cents to 146.4 c/l), Adelaide (down by 21.6 cents to 130.8 c/l), Perth (up by 0.5 cents to 136.6 c/l), Darwin (down by 1 cent to 143.5 c/l), Canberra (down by 0.7 cents to 143.3 c/l) and Hobart (down by 0.5 cents to 151.7 c/l).

• The smoothed gross retail margin for unleaded petrol rose from 14.64 cents a litre to 15.42 cents a litre last week (24-month average: 13 cents a litre).

• The national average diesel petrol price fell by 0.5 cents a litre to 148.0 cents a litre over the week. The metropolitan price fell by 0.6 cents to 146.8 cents a litre with the regional price down by 0.5 cents to 148.9 cents a litre.

• MotorMouth records the following average retail prices for capital cities today: Sydney 130.1c; Melbourne 142.7c; Brisbane 137.8c; Adelaide 127.2c; Perth 126.4c; Canberra 143.1c; Darwin 143.2c; Hobart 151.6c.

• Today, the national average wholesale (terminal gate) unleaded petrol price stands at 125.9 cents a litre, up 2.4 cents over the week. The terminal gate diesel price stands at 133.8 cents a litre, up by 2.0 cents over the past week.

• Last week, the key Singapore gasoline price rose by US$1.70 or 2.4 per cent to US$71.50 a barrel. In Australian dollar terms, the Singapore gasoline price rose by $1.28 or 1.3 per cent last week to $101.95 a barrel or 64.12 cents a litre.

Inflation

• The Melbourne Institute monthly headline inflation gauge was flat for a second successive month in June. The gauge’s annual growth rate decelerated from 1.7 per cent in May to 1.6 per cent in June. The smoothed 12-month annual average of the gauge is at 1.8 per cent – the slowest growth rate in over two years.

• The trimmed mean gauge fell by 0.1 per cent in June after a flat outcome in May. But the gauge’s annual growth rate increased from 1.5 per cent in May to 1.8 per cent in June.

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.

• 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?

• Global crude oil prices fell by almost 3 per cent in the June quarter, doing their bit to keep a lid on global inflationary pressures.

• The Melbourne Institute’s Australian monthly inflation gauge has been flat for successive months with the annual growth rate in inflation at just 1.6 per cent. And the Reserve Bank’s preferred ‘trimmed mean’ measure actually fell by 0.1 per cent in June.

• Low inflation is a global phenomenon, puzzling policymakers, enabling central banks to cut interest rates, benefiting consumers and businesses.

• CommSec expects a rate cut to be delivered tomorrow. The aim is to run the economy faster to get the jobless rate down to a new ‘floor’ level of 4.5 per cent or lower to reduce spare capacity and stoke inflation.

Published by Ryan Felsman, Senior Economist, CommSec