Luxury vehicle sales lift; Petrol hits 20-month high

CommSec Luxury Vehicle index; Oil market update

What happened? The CommSec index of luxury new vehicle sales rose to a 3-month high in August (and second highest in 33 months) – an annual total of 92,177 vehicles.

Implications: An estimated $62.5 billion has been redirected from overseas travel to domestic spending and savings. Purchases of cars, home and discretionary goods are benefitting.

Weekly oil market update: Last week, the Brent crude oil price rose by US31 cents or 0.4 per cent. The Nymex crude oil price rose by US43 cents or 0.6 per cent. The S&P/ASX Energy sector fell by 1.9 per cent last week, outpacing the broader ASX 200 index (down by 1.5 per cent).

Petrol: Last week the national average price of unleaded petrol rose by 3.6 cents to a 20-month high of 154.2 cents per litre (c/l), according to the Australian Institute of Petroleum.

The CommSec luxury vehicle index is compiled as a gauge of broader spending trends. Movements in energy prices drives shares of energy producers. Energy prices can also affect consumer spending, and in turn, prospects for retailers.

What does it mean?

• Low interest rates, government support payments and tighter job markets have supported spending, but another key influence is the closure of foreign borders. Each year Aussies spend around $48 billion on overseas travel. The restrictions since 2020 mean that around $62 billion has been re-directed to domestic savings and spending. Arguably, housing, discretionary spending and up-market purchases may have benefited from this redirection of travel spending more than other assets.

• The CommSec luxury vehicle index was leading the recovery of the broader vehicle market just before Covid hit in late 2019/early 2020 and maintained the out-performance though 2020 and into 2021. Now annual sales of new vehicles are up 17.3 per cent on a year ago, ahead of the 10.2 per cent gain of luxury vehicles. The stronger growth of the broader market partly represents spending by businesses on sports utility vehicles (SUVs), Utes and other light commercial vehicles in response to government asset write-off provisions. Sales to private buyers now represent more than half of new vehicle sales, possibly boosted by a re-direction of travel spending and health concerns. There are also strong vehicle sales to the rental market.

• Global oil prices were mixed last week. Key global crude prices rose by around 0.5 per cent. But the pivotal Singapore gasoline price fell by over 1 per cent. Investors are digesting rising global cases of the Delta variant of Covid-19. But vaccination rates continue to lift. Supplies of oil from the Gulf of Mexico are still disrupted by Hurricane Ida – it is estimated that around 75 per cent of Gulf offshore oil output is still halted.

• Brent and Nymex crude fell by just over 1.5 per cent on Thursday after China said it would sell state crude reserves via public auction to ease prices. Then on Friday, Brent and Nymex rose by over 2 per cent on news of a phone call between Chinese leader Xi Jinping and US President Joe Biden. It is hoped that the call signifies better relations between the two super powers.

• Details of the call were made public by the Chinese Ministry of Foreign Affairs:

What do you need to know?

Weekly oil market update

• Last week, the Brent crude oil price rose by US31 cents or 0.4 per cent. The Nymex crude oil price rose by US43 cents or 0.6 per cent.

• The benchmark Singapore gasoline price fell by US90 cents or 1.1 per cent to US$81.70 a barrel last week. In Aussie dollar terms, the Singapore gasoline price fell by 60 cents or 0.5 per cent to $110.67 a barrel or 69.61 cents a litre.

• Last week the national average price of unleaded petrol rose by 3.6 cents to a 20-month high of 154.2 cents per litre (c/l), according to the Australian Institute of Petroleum.

• The national average wholesale (TGP) petrol price rose by 0.1 cents last week to 136.8 cents per litre. Today the TGP price sits at 136.8 cents per litre.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 159.7c/l; Melbourne 162.3c/l; Brisbane 169.3c/l; Adelaide 139.0c/l; Perth 142.9c/l; Hobart 155.7c/l; Darwin 151.8c/l and Canberra 159.9c/l.

CommSec Luxury Vehicle index

• CommSec maintains an index of luxury vehicle sales as a gauge of broader spending for both the car and housing markets. Over time spending at the ‘top end’ of markets has led broader trends across the economy.

• In the year to August, luxury new vehicle sales totalled 92,177, up 10.2 per cent on the year. All new vehicles are up 17.3 per cent off a low base led by commercial vehicles (up 25.6 per cent) and sports utility vehicles (SUVs, up 24.4 per cent).

• Included in the CommSec luxury vehicle index: Aston Martin, Audi, BMW, Bentley, Ferrari, Hummer, Jaguar, Lamborghini, Lexus, Lotus, McLaren, Maserati, Maybach, Mercedes-Benz, Morgan, Porsche, and Rolls Royce.

• Notable amongst the luxury makes, annual sales of both Porsche and Lexus vehicles are the second highest on record (behind May 2021) while BMW sales are at 4-year highs. Also annual sales of Lotus are at 7-year highs; sales of Aston Martin are at 16-month highs; and sales of Bentley are at 2-year highs.

Published by Craig James, Chief Economist, CommSec