Mixed retail spending; Crude oil prices march higher
Preliminary retail trade; Oil market

What happened? ‘Preliminary’ retail trade rose by 0.1 per cent in May to be 7.4 per cent higher than a year ago. Victorian sales fell by 1.5 per cent in May, but spending rose by 1.5 per cent in both Queensland and Western Australia. Food retailing (up 1.5 per cent) led gains in the month, but clothing, footwear and personal accessory retailing was down 1.5 per cent with spending on household goods 1.0 per cent lower.

Also of note: Global oil prices posted a fourth straight weekly gain after OPEC sources said the producer group expected limited US oil output growth this year. Brent crude rose by 1.1 per cent to US$73.51 a barrel and the US Nymex added 1 per cent to US$71.64 a barrel.

Implications: Investors looking for shelter this week from a reversal in commodity prices and materials shares could look at the energy sector. The Bloomberg energy sub-index has lifted 6.2 per cent so far in June, ahead of the Bloomberg ex-energy commodity index, which is down 7.4 per cent over the period in US dollar terms.

Retail trade data is important for consumer-focussed companies. Movements in the energy prices can affect consumer spending, and in turn, prospects for retailers.

What does it all mean?

• Retail spending was mixed in May, according to preliminary data released by the Bureau of Statistics. Sales edged higher by just 0.1 per cent in the month, below economist expectations for a 0.4 per cent lift. Spending had increased by over 1.0 per cent in both March and April, but Victoria’s fourth Covid-19 lockdown – which commenced on May 28 – reduced sales in the state amid reduced mobility and shopping centre traffic due to restrictions. Overall, retail turnover at $31.07 billion in May is just 1.6 per cent below November’s record high.

• While sales fell 1.5 per cent in Victoria in May, spending lifted 1.5 per cent in both Queensland and Western Australia with persistent ‘mini-lockdowns’ creating varied outcomes across the country. But retail spending is up a solid 7.4 per cent on a year ago after the strongest annual growth rate (up 25 per cent) was recorded in April. Overall, the outlook for consumer spending remains positive due to elevated confidence, the strong labour market recovery, rising asset prices, border closures and excess household savings. A rotation from goods to services spending is expected to continue, but will be further hindered by virus flare-ups in Sydney and Melbourne in June.

• Investors looking for some shelter this week from a reversal in commodity prices and materials shares could look at the energy sector. The ‘hawkish’ remarks from the US Federal Reserve and China’s intervention into commodity markets saw a broad-based sell-off across the metals complex last week. But energy shares are being supported by the re-opening trade with crude oil prices lifting on stronger demand and OPEC+ supply discipline. The Bloomberg energy sub-index has lifted 6.2 per cent so far in June, ahead of the Bloomberg ex-energy commodity index, which is down 7.4 per cent over the period in US dollar terms.

• Global oil prices posted a fourth straight weekly gain after OPEC sources said the producer group expected limited US oil output growth this year. Brent crude rose by 1.1 per cent to US$73.51 a barrel and the US Nymex added 1 per cent to US$71.64 a barrel last week. And oil futures are higher in Asian trade today after cleric Ebrahim Raisi won the Iranian presidential election on June 18, increasing the risks of postponement of a nuclear deal with the US. A delay in the lifting of US sanctions could slow the resumption of crude exports by OPEC producer, Iran, at a time of increasing US demand and signs of a recovery in India following virus lockdowns.

• Motorists hitting the road for the school holidays on Australia’s East Coast should assess their fuel needs. Retail unleaded petrol prices in Sydney and Melbourne have begun lifting following the conclusion of the discounting cycle. According to MotorMouth, retail unleaded pump prices are averaging 138.6 cents a litre in Sydney and 136.3 cents a litre in Melbourne today. But prices have already been hiked to 175.9 cents a litre in some suburbs, so motorists should fill up now ahead of the most expensive phase of the fuel cycle.

What do you need to know?

‘Preliminary’ retail trade – May

• ‘Preliminary’ retail trade rose by 0.1 per cent in May to be 7.4 per cent higher than a year ago. Victorian sales fell by 1.5 per cent in May, but spending rose by 1.5 per cent in both Queensland and Western Australia. Food retailing (up 1.5 per cent) led gains in the month, but clothing, footwear and personal accessory retailing was down 1.5 per cent with spending on household goods 1.0 per cent lower.

Weekly oil market update

• Last week the key Singapore gasoline price fell by US58 cents or 0.7 per cent to US$79.32 a barrel. In Aussie dollar terms, the Singapore gasoline price lost 75 cents or 0.7 per cent to $102.30 a barrel or 61.38 cents a litre.

• Last week the national average price of unleaded petrol fell by 2.7 cents a litre to 139.6 cents per litre (c/l), according to the Australian Institute of Petroleum. But the national average wholesale (TGP) petrol price was up by 1.2 cents last week to 129.7 cents per litre and stands at 131.1 cents a litre today.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 138.6c/l; Melbourne 136.3c/l; Brisbane 144.6c/l; Adelaide 127.4c/l; Perth 130.4c/l; Hobart 145.7c/l; Darwin 139.9c/l and Canberra 140.9c/l.

Published  by Ryan Felsman, Senior Economist, CommSec