Chinese economy slows. Aussie petrol at 13-year high.

Chinese economic data; Energy market update

The Chinese economy grew at a 4.9 per cent annual pace in the September quarter.

Oil prices continues to rise with Nymex crude at fresh 7-year highs.

The national average weekly petrol price lifted 6.9 cents to a 13-year high of 160.7 cents per litre.

Chinese economic data – September quarter

• As measured by gross domestic product (GDP), the Chinese economy grew at a 4.9 per cent annual rate in the September quarter (Reuters survey: 5.2 per cent), down from 7.9 per cent in the June quarter. The economy grew by 0.2 per cent in the quarter (survey: 0.5 per cent), down from the 1.2 per cent growth in the June quarter.

• Also China’s National Bureau of Statistics released other key data for the September month:

Retail sales rose at a 4.4 per cent annual pace (Reuters survey: 3.3 per cent).

Industrial production rose at a 3.1 per cent annual pace (survey: 4.5 per cent).

Fixed asset investment rose by 7.3 per cent (survey: 7.9 per cent). Private investment rose 9.8 per cent.

Unemployment rate 4.9 per cent (survey: 5.1 per cent).

• The data generally fell short of forecasts, so it keeps the door open for more monetary stimulus. Delta variant outbreaks, power outages and disruptions to production at factories alongside a widespread regulatory crackdown weighed on growth in the quarter. The Aussie dollar absorbed the news, hovering near US74.15 cents after the data release.

• The Chinese economic data is important for two reasons. China is the second largest economy in the globe as well as being Australia’s largest trading partner. And despite battling a property crisis, energy crisis and outbreaks of the Delta variant in recent months, the Chinese economy is holding up reasonably well. That said, greater policy support appears needed to cushion the economy from persistent supply shocks.

• The People’s Bank of China Governor Yi Gang was reported as saying that the Evergrande risk can be contained. The central bank chief also said annual growth in the producer price index will slow by the end of the year from 26-year highs.

• Ratings agency, Moody’s, said that recent volatility in China’s property sector was unlikely to present a systemic threat.

Weekly energy market update

• The Australian listed Energy sector eased 0.2 per cent last week from 10-month highs. The Nymex oil price rose 3.7 per cent to 7-year highs; Asian natural gas prices lifted 4.1 per cent (to the highest levels in 10 years of records); and thermal coal rose by 0.6 per cent. Note that the Aussie dollar rose by 1.7 per cent over the same period.

• The now familiar story is that economies are reopening at a faster rate than producers can lift supply. And commodity prices are rising across the board – mining, energy, agricultural commodities. And with foreign borders opening in a haphazard way across the globe, country specific and localised labour shortages have also developed.

• In terms of the European gas crisis, Reuters reports Deputy Prime Minister Alexander Novak on Saturday as saying that Russian gas consumption is running at a record high but that Moscow is still ready to increase supplies to Europe should it receive such requests.

• Reuters notes: “Russia, whose gas production and exports to EU are already near record highs, has said it needs to finish filling its own gas storage reserves before it increases supplies to Europe’s spot market. It plans to complete this by end-October.”

• Covid-19 is a once in a century event and it was expected that the path out of lockdowns was going to be bumpy. But it is important to not over-react – supply will catch up, it is only the time frame that is uncertain. One forward-looking indicator is the count of US oil and gas rigs and this lifted by 10 in the past week to an 18-month high of 543.

• And for energy commodities, much may depend on the weather over the next few weeks. Warmer weather is forecast, tempering demand for energy commodities for heating purposes.

Weekly oil market data

• Over the week, Brent rose for the sixth straight week, up 3.0 per cent to US$84.86 a barrel. Nymex rose for the eighth straight week, up by 3.7 per cent to US$82.28 a barrel.

• The benchmark Singapore gasoline price rose by US$4.46 or 4.7 per cent to a 7-year high of US$99.24 a barrel last week. In Aussie dollar terms, the Singapore gasoline price lifted $3.84 or 3 per cent to a 7-year high of $133.71 a barrel or 84.09 cents a litre. Over the past two months Singapore gasoline has risen 31 per cent in US$ terms and lifted 26 per cent in $A terms.

• The national average wholesale (TGP) petrol price rose by 3.7 cents last week to 149.0 cents per litre. Today the TGP price sits at a 13-year high of 151.4 cents per litre.

• The national average unleaded pump price rose by 6.9 cents last week to a 13-year high of 160.7 cents a litre (July 20, 2008).

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 170.4c/l; Melbourne 174.7c/l; Brisbane 178.0c/l; Adelaide 147.5c/l; Perth 152.4c/l; Hobart 166.5c/l; Darwin 160.0c/l and Canberra 161.7c/l.

• Compared with the lows of 18 months ago it is costing motorists an extra $56 each time they fill up a 70 litre car with petrol.

Published by Craig James, Chief Economist, CommSec