Brisbane petrol prices hit 4-month high. Record lift in inflation; Job ads rebound.

Brisbane petrol prices hit 4-month high

Record lift in inflation; Job ads rebound

Weekly Petrol Prices; Job advertisements; Inflation gauge

Fuel prices: According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 1.6 cents to 124.1 cents a litre last week. And the national average diesel petrol price fell by 0.1 cent to 120.2 cents a litre over the past week.

East Coast petrol prices: According to data from MotorMouth, average daily unleaded retail petrol prices in Brisbane are back at 4-month highs at $1.43 a litre. Pump prices have lifted by 31 cents a litre since July 24. However, average unleaded petrol prices have eased by 13 cents a litre in Sydney and Melbourne to around $1.23 and $1.28 a litre, respectively, as the discounting cycle continues.

Job advertisements: ANZ job advertisements rose by 16.7 per cent in July to 104,916 available positions. But ads are still down by 34 per cent from a year ago. Ads rose by a record 41.4 per cent in June after falling by 0.1 per cent in May and a record 53.3 per cent decline in April.

Inflation gauge: The Melbourne Institute’s headline inflation gauge rose by a record 0.9 per cent in July (biggest lift since September 2002) to be up 1.3 per cent over the year. And the Reserve Bank’s preferred underlying inflation measure – the trimmed mean – rose by 0.4 per cent to be up 0.7 per cent on the year.

China data: The Caixin manufacturing purchasing managers’ index (PMI) rose from 51.2 in June to 52.8 in July (survey: 51.1) – the highest reading since January 2011.

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. The job advertisements data is a leading indicator of the job market and therefore important for consumer-focussed stocks and companies such as SEEK. The inflation gauge estimates month-to-month price movements for a wide-ranging basket of goods and services.

What does it all mean?

• Brisbane’s unleaded petrol prices are averaging $1.43 a litre today, up by 31 cents a litre from the lows of the most recent retail price cycle on July 24, according to real-time fuel app MotorMouth. With petrol prices at the most expensive phase of the cycle motorists should avoid filling up their tanks if possible.

• Sydney and Melbourne drivers, however, are enjoying much lower unleaded petrol prices – averaging between $1.23 and $1.28 a litre today – down by around 13 cents a litre from recent peaks on July 21. Motorists should top up rather than fill up their cars this week with prices expected to hit the bottom of the cycle next week.

• The number of Aussie job advertisements continued to lift in July, albeit off record low levels in May. The recovery in job hiring intentions comes after recruitment website SEEK reported a 0.9 per cent increase in job ad volumes in the fortnight ended July 26 when compared to the previous two weeks.

• When compared to February 2020, job ad volumes are up most in Western Australia (up 89.5 per cent), South Australia (up 88.6 per cent), Queensland (up 83.3 per cent), the Northern Territory (up 82.4 per cent) and Tasmania (up 82 per cent) in the fortnight ended July 26, 2020. Clearly, the Aussie states and territories enjoying the most success in supressing the virus and re-opening their economies more quickly are also generating the most job vacancies as activity levels pick up.

What do the reports and figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 1.6 cents to 124.1 cents a litre last week. The metropolitan price declined by 2.2 cents to 126.5 cents a litre and the regional price was 0.3 cents lower at 119.2 cents a litre.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 7.4 cents to 126.8 c/l), Melbourne (down by 7.5 cents to 131.7 c/l), Brisbane (up by 12.8 cents to 127.0 c/l), Adelaide (down by 7.0 cents to 120.4 c/l), Perth (down by 0.7 cents to 119.4 c/l), Darwin (unchanged at 118.9 c/l), Canberra (steady at 122.9 c/l) and Hobart (down by 0.1 cents to 124.0 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol rose from 16.84 cents a litre to 9-week highs of 17.86 cents (24-month average: 14.3 cents a litre).

• The national average diesel petrol price fell by 0.1 cent to 120.2 cents a litre over the past week. The metropolitan price was steady at 118.5 cents a litre and the regional price was just 0.1 cents lower at 121.6 cents a litre.

• Last week the national average wholesale unleaded petrol price (terminal gate or TGP) was down by 0.6 cents to 102.8 cents per litre. Today, the average unleaded TGP stands at 102.1 cents a litre, down by 1 cent over the week. The terminal gate diesel price stands at 105.7 cents a litre, down by 0.8 cents over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 123.2c; Melbourne 127.6c; Brisbane 143.0c; Adelaide 133.2c; Perth 108.0c; Canberra 122.9c; Darwin 118.9c; Hobart 123.9c.

• Last week the key Singapore gasoline price fell by US$1.85 a barrel or 4 per cent to a 7-week low of US$44.50 a barrel. In Australian dollar terms, the Singapore gasoline price fell by $3.72 or 5.7 per cent to 7-week lows of $61.69 a barrel or 38.80 cents a litre.

Job advertisements – July

• ANZ job advertisements rose by 16.7 per cent in July to 104,916 available positions. But ads are still down by 34 per cent from a year ago. Ads rose by a record 41.4 per cent in June after falling by 0.1 per cent in May and a record 53.3 per cent decline in April.

• ANZ said, “Building on June’s 41 per cent rebound, ANZ Job Ads rose a further 17 per cent in July. But the pace of gains slowed, particularly in the second half of the month. The second wave of COVID-19 cases and return to Stage 3 restrictions in Melbourne and the Mitchell Shire have undoubtedly weighed on the recovery in labour demand so far. SEEK has noted a divergence between Victoria and most other states and territories in recent SEEK job ads.”

Inflation – July

• The Melbourne Institute’s headline inflation gauge rose by a record 0.9 per cent in July (biggest lift since September 2002) to be up 1.3 per cent over the year.

• The Reserve Bank’s preferred underlying inflation measure – the trimmed mean gauge – rose by 0.4 per cent to be up 0.7 per cent on the year.

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.

• The monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.

• Melbourne Institute developed a monthly inflation indicator to give markets and policy makers a more regular 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.

What are the implications for investors?

• Consumer prices fell by 1.9 per cent in the June quarter – the biggest fall in prices in 89 years. But prices rose by a record 0.9 per cent (since records began in September 2002) in July according to data released by the Melbourne Institute today. While normally consumers and economists wouldn’t cheer a lift in prices – especially during a severe economic contraction – the last thing anyone wants to see is deflation gripping the economy. The ending of the national free childcare program and a 5 per cent lift in petrol prices in July, likely boosted consumer prices.

• In July, Brent crude oil prices lifted for a fourth successive month (up 5.1 per cent) and US Nymex prices rose for a third consecutive month (up 2.6 per cent) from the depths of the virus lockdown in April. But oil has begun August on the back foot with the US Nymex price edging below $US40 a barrel in trading today with OPEC+ set to step up output, adding about 1.5 million barrels a day to global supply. Rising political tensions between the US and China and rising global infection rates are also dampening sentiment. Oil supermajors’ Royal Dutch Shell and Exxon Mobil have already warned that there may not be a demand recovery until next year.

• The Chinese economic recovery continues. China’s private sector Caixin manufacturing index hit 52.8 in July – the highest level since early 2011. While there is volatility on a month-to-month basis, industrial activity is strengthening. A pick up in overseas demand – as reflected in higher new export orders – suggests that a re-opening of advanced economies is supportive of China’s supply-side recovery. Aussie miners are beneficiaries of China’s policy stimulus and infrastructure spending with record iron ore shipments in recent months.

• All eyes are now on the Reserve Bank tomorrow. With Australia’s second largest economy – Victoria – under a renewed hard lockdown and Queensland re-closing its border to Sydneysiders due to the escalation in the virus crisis, pressure is mounting on policymakers. Weekly payrolls data has weakened and consumer confidence is being eroded by the virus’ second wave.

• Governor Philip Lowe is expected to sit tight for now, but commentary around the economic impact of the Melbourne shutdown and clues about the Board’s economic projections – to be released on Friday – will be a key focus for investors and economists. While the virus response is largely focused on an easing of fiscal policy, monetary conditions continue to tighten with real interest rates lifting and the Aussie dollar remaining stubbornly anchored around US71 cents.

Published by Ryan Felsman, Senior Economist, CommSec