East Coast petrol prices spike; Used car prices lift

China’s ‘V’-shaped recovery; Aussies return home

Petrol Prices; Used car prices; Tourism; Chinese economic data

Fuel prices: The national average price of unleaded petrol fell by 0.2 cents to 119.6 cents a litre last week according to the Australian Institute of Petroleum. But daily unleaded retail petrol prices in Brisbane, Sydney and Melbourne are averaging $1.20-$1.30 a litre today (source: MotorMouth) – all in the early stages of a price hike. Motorists should top up rather than fill up with prices likely to exceed $1.50 a litre.

Used car prices: According to Datium Insights (based on Pickles auction data), used car prices rose 1.7 per cent last week with Repossessions (+14.9 per cent) up the most.

Provisional overseas travel: In December there were 35,100 estimated overseas arrivals (+17.9 per cent on November) and 49,900 estimated departures (+9.8 per cent). Australian citizens accounted for 17,800 arrivals and 24.1 per cent (or 12,020) of all departures were those leaving on temporary student visas.

Chinese economic growth: The Chinese economy (GDP) expanded by 2.6 per cent in the December quarter (consensus: +2.7 per cent) after expanding by 3.0 per cent in the September quarter. GDP grew at a 6.5 per cent annual rate in the December quarter from a year ago (consensus: +6.2 per cent) – the strongest pace in 2 years – up from a 4.9 per cent annual growth rate in November. Economic activity expanded by 2.3 per cent in calendar year 2020 (consensus: +2.1 per cent).

China monthly activity data: Retail sales expanded at a 4.6 per cent annual rate in December (consensus: +5.5 per cent). Industrial production rose at a 7.3 per cent annual rate (consensus: +6.9 per cent). Fixed-asset investment lifted by 2.9 per cent over the 12 months to December from a year ago (consensus: +3.2 per cent). The unemployment rate was steady at 5.2 per cent in December.

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. Used car price data is useful in gauging activity levels in the motor vehicle market. The tourism data is useful in showing the impact of travel restrictions on the economy. The Chinese data is important for exporters, especially rural producers, consumer goods, mining and energy companies.

What does it all mean?

• East Coast unleaded petrol prices are all in the early stages of the price hike cycle. Today, pump prices have hit $1.56 a litre in some suburbs of Brisbane and Sydney. And prices are as high as $1.52 a litre in Melbourne, according to real-time fuel app MotorMouth. Motorists are encouraged to top up at these higher prices rather than fill up this week with prices likely to hit the most expensive phase of the fuel cycle on the weekend.

• Fancy buying a used car? Prices have lifted by 2.7 per cent and 1.7 per cent in the first two weekly readings by Datium Insights in 2021. While supply rebounded after the holiday period, stock remains low and clearance rates have hit all-time highs. Data on Friday showed that personal fixed-term loan commitments for the purchase of motor vehicles jumped 11.7 per cent in November to a 3-year high of $1,216.9 million – implying that demand for both new and used motor vehicles is strong.

• China’s ‘V’-shaped economic recovery is complete with economic growth at pre-pandemic levels in the December quarter. In fact, gross domestic product (GDP) accelerated from 4.9 per cent to 6.5 per cent in the fourth quarter from a year earlier – the strongest pace in two years. GDP grew at an astonishing 2.3 per cent in calendar year 2020 – avoiding a technical recession – with China likely to be the best performing ‘major’ economy, despite the huge hit from the global pandemic recession. That said, the 2020 growth rate was the slowest since 1976.

What do the figures show?

Weekly petrol prices

• Last week the national average price of unleaded petrol fell by 0.2 cents to 119.6 cents a litre (c/l) according to the Australian Institute of Petroleum. Metropolitan prices fell by 0.4 cents to 119.1 c/l but regional prices rose 0.2 cents to 120.5 c/l.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 3.5 cents to 119.0 c/l), Melbourne (up by 1.5 cents to 119.1 c/l), Brisbane (down by 3.1 cents to 117.7 c/l), Adelaide (down by 14.5 cents to 116.9 c/l), Perth (up by 1.3 cents to 121.6 c/l), Darwin (up by 2.2 cents to 118.4 c/l), Canberra (up by 0.5 cents to 123.7 c/l) and Hobart (up 0.6 cents to 124.8 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol fell from 16.73 cents to a 6-month low of 15.36 cents a litre (24-month average: 15.1 cents a litre).

• The national average diesel petrol price rose by 0.6 cents to 121.4 cents a litre over the past week. The metropolitan price lifted 0.6 cents to 120.3 cents a litre and the regional price was up 0.5 cents to 122.2 cents a litre.

• Last week, the national average unleaded Terminal Gate Price (TGP) was up 1.7 cents to 110.6 cents a litre. The terminal gate diesel price lifted 0.5 cents to 109.9 cents a litre.

• Today, the average unleaded TGP stands at 112.3 cents a litre, up by 2.7 cents over the week. The terminal gate diesel price stands at 111.3 cents a litre, up 2.3 cents a litre over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 130.3c/l; Melbourne 128.4c/l; Brisbane 120.8c/l; Adelaide 141.6c/l; Perth 110.9c/l; Hobart 125.1c/l; Darwin 119.2c/l; and Canberra 124.5c/l.

• Last week the key Singapore gasoline price rose by US$1.06 or 1.8 per cent to an 11-month high of US$60.47 a barrel. In Australian dollar terms, the Singapore gasoline price rose by US$1.39 or 1.8 per cent to a 10-month high of $77.87 a barrel or 48.97 cents a litre.

Weekly used vehicle market – January 15

• Data analytics firm, Datium Insights, provides a weekly report on the used vehicle market. In the week to January 15, used motor vehicle prices rose by 1.7 per cent with repossessions (+14.9 per cent) up most.

• In the latest week supply increased by 32.8 per cent following the Christmas and New Year holiday period. Clearance rates rose 4.3 per cent to all-time highs.

• By vehicle, Datium reported, “Prices for top 15 traded vehicles were mixed with the Mitsubishi Outlander (+6.5 per cent) seeing the largest increase and Subaru Outback (-5.6 per cent) seeing the largest decrease.”

Provisional arrivals & departures – December

Arrivals

• According to the ABS there was “35,100 estimated trips, 17,800 of these are Australian citizens;

• 17.9 per cent increase compared to the previous month and a 98.1 per cent decrease compared to the corresponding month of the previous year;

• 14.1 per cent (or 4,900) of all arrivals were New Zealand citizens, the largest group apart from Australian citizens returning home;

• 7.8 per cent of all arrivals were those arriving on permanent skilled visas.”

Departures

• According to the ABS there were “49,900 estimated trips, 12,100 of these are Australian citizens;

• 9.8 per cent increase compared to the previous month and a 97.8% decrease compared to the corresponding month of the previous year;

• 18.7 per cent (or 9,300) of all departures were Chinese citizens;

• 24.1 per cent of all departures were those leaving on temporary student visas.”

China economic data – December quarter

• The Chinese economy (GDP) expanded by 2.6 per cent in the December quarter (consensus: +2.7 per cent) after expanding by 3.0 per cent in the September quarter. GDP grew at a 6.5 per cent annual rate in the December quarter from a year ago (consensus: +6.2 per cent) – the strongest pace in 2 years – up from a 4.9 per cent annual growth rate in November. Economic activity expanded by 2.3 per cent in calendar year 2020 (consensus: +2.1 per cent).

• Retail sales expanded at a 4.6 per cent annual rate in December (consensus: +5.5 per cent) after lifting at a 5.0 per cent pace in November. Over the year to December, spending rose the most on Communications appliances (up 21.0 per cent), followed by tobacco & alcohol (up 20.9 per cent) and beverages (up 17.1 per cent). But spending on petroleum (down 3.8 per cent) fell.

• Industrial production rose at a 7.3 per cent annual rate in December (consensus: +6.9 per cent) after lifting at a 7.0 per cent rate in November. Over the year to December, manufacturing output lifted by 7.7 per cent, electricity output rose by 6.1 per cent and mining production lifted 4.9 per cent. Production rose the most for pharmaceuticals (up 16.9 per cent) and machineries (up 15.6 per cent).

• Fixed-asset investment expanded by 2.9 per cent in the 12 months to December from a year ago (consensus: +3.2 per cent) after expanding at a 2.6 per cent rate in the 11 months to November from a year earlier. Over the year to December, investment by the private sector rose by 1.0 per cent and investment by state-owned enterprises increased by 5.3 per cent. By industry, investment in pharmaceuticals (up by 28.4 per cent) and healthcare & social works (up 26.8 per cent) rose most. But investment in mining (down 14.1 per cent) and car manufacturing (down 12.4 per cent) fell most.

• Property investment expanded at a 7.0 per cent annual rate over the year to December (consensus: +7.2 per cent) – the strongest pace in 12 months.

• The unemployment rate (nationwide survey-based jobless rate) was steady at 5.2 per cent in December (consensus: 5.2 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.

• 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.

• The Australian Bureau of Statistics releases provisional data on overseas arrivals and departures, produced monthly and is an indicator of the health of the tourism sector.

• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th 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 investors?

• Global crude oil prices traded around 11-month highs early last week on US fiscal stimulus optimism. A weaker US dollar also provided support to crude’s upward trajectory following Saudi Arabia’s plans to limit supply. But a combination of a stronger dollar, weak US economic data and surging Covid-19 infection rates weighed on the demand outlook on Friday. The Brent and US Nymex oil prices both fell 2.3 per cent. As Australia is a net importer of refined crude product, pump prices are expected to remain elevated as servos pass on increased costs to consumers at the bowser.

• China’s industrial-led economic recovery continues. Industrial production grew for a ninth straight month in December, driven by strong manufacturing activity and export demand. Economists polled by Reuters are expecting China’s 2021 GDP growth to be around 8.4 per cent. Commonwealth Bank (CBA) Group economists are estimating that growth could be even stronger at 9.1 per cent, led by strong export growth and domestic consumption. But there are some near-term risks to the economic outlook with rising Covid-19 infection rates potentially impacting consumer spending and travel mobility in the February Lunar New Year holiday period.

• While the continuing rebound in the Chinese economy is good news for Australia, China’s commitment to reduce carbon emissions could adversely impact demand for top export iron ore as steel production is potentially curbed. Also, the international tourism and education sectors – which are both heavily reliant on Chinese citizen arrivals – continue to be hard hit by border closures and political friction. Around 65,160 Chinese citizens departed Australia between April and December 2020. And 83,820 international students on temporary visas left the country over the period, reducing fee incomes of universities.

Published by Ryan Felsman, Senior Economist, CommSec