Manufacturing activity near 3-year high. Cheapest & dearest places for petrol

Manufacturing activity near 3-year high

Cheapest & dearest places for petrol

Petrol Prices; Used car prices; Manufacturing; Services

Purchasing managers’ indexes (PMI): The IHS Markit ‘flash’ PMI for manufacturing rose from 54.2 to a 35-month high of 56.1 in November. The services PMI lifted from 53.7 to 4-month high of 54.9. The composite PMI rose from 53.5 to a 4-month high of 54.7. Readings above 50 indicates an expansion in activity.

Fuel prices: The national average price of unleaded petrol rose by 2.3 cents to 122.2 cents a litre (c/l) last week according to the Australian Institute of Petroleum. Metropolitan prices rose by 3.6 cents to 124.9c/l with regional prices down by 0.3 cents to 116.7c/l.

Cheapest & dearest: Dearest place for petrol last week was Alice Springs (170.9c/l). Cheapest was Muswellbrook in NSW at 102.1c/l. Brisbane and Sydney were amongst 15 dearest centres of 179 towns.

Used car prices: Datium Insights reported that wholesale used car prices rose by 2.6 per cent in the past week after falling 1.2 per cent in the prior week.

Resources and energy projects: The Department of Industry, Science, Energy and Resources has released the 2020 edition of the Resources and Energy Major Projects publication, an annual census of Australian resources and energy projects in the investment pipeline.

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 ‘flash’ purchasing manager’s index gives a guide to conditions in manufacturing and services sectors.

What does it all mean?

• The recovery of the Australian economy continues, supported by government and central bank stimulus and the good performance of health authorities in flattening the virus curve. According to latest estimates, manufacturing activity is near 3-year highs while services activity is at 4-month highs.

• Global oil prices rose by between 1-2 per cent on Friday. News of successful COVID-19 vaccine trials countered news of rising virus case number across the globe. Brent crude rose by US76 cents or 1.7 per cent to US$44.96 a barrel. And the US Nymex rose by US41 cents or 1.0 per cent to US$42.15 a barrel. Over the week Brent and Nymex rose by near 5 per cent.

• Looking across petrol prices in capital cities, Sydney pump prices have fallen for six days since peaking, while Brisbane prices have fallen for three days and Adelaide prices have fallen for 11 days. Melbourne prices have fallen for an unusually long period of 29 days and prices are close to bottoming. And the usual weekly discounting cycle is ending in Perth.

• It’s worth noting that this time last year unleaded petrol averaged 153 cents a litre, around 31 cents a litre more than today. The average household is saving almost $50 a month in filling up the car with petrol than a year ago.

• But there are huge disparities in the cost of petrol across 179 towns and cities. Sydney and Brisbane were amongst the 15 dearest places for unleaded petrol in the past week alongside remote centres like Karratha, Katherine and Port Hedland.

What do the figures show?

Weekly petrol prices

• The national average price of unleaded petrol rose by 2.3 cents to 122.2 cents a litre (c/l) last week according to the Australian Institute of Petroleum. Metropolitan prices rose by 3.6 cents to 124.9c/l with regional prices down by 0.3 cents to 116.7c/l.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (up by 8.1 cents to 133.7 c/l), Melbourne (down by 5.9 cents to 115.2 c/l), Brisbane (up by 20.8 cents to 138.1 c/l), Adelaide (down by 10.8 cents to 115.5 c/l), Perth (up by 0.3 cents to 116.4 c/l), Darwin (down by 0.5 cents to 115.6 c/l), Canberra (down by 0.3 c/l to 120.8 c/l) and Hobart (up by 0.1 cents to 123.0 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol rose from 16.34 cents to 17.25 cents (24-month average: 15.0 cents a litre).

• The national average diesel petrol price fell by 0.2 cents to 117.8 cents a litre over the past week. The metropolitan price fell by 0.2 cents to 116.4 cents a litre and the regional price was down 0.2 cents to 118.9 cents a litre.

• Last week, the national average unleaded Terminal Gate Price (TGP) was up 2.0 cents to 102.3 cents a litre. The terminal gate diesel price rose by 2.9 cents to 102.2 cents a litre.

• Today, the average unleaded TGP stands at 102.1 cents a litre, up by 0.1 cents over the week. The terminal gate diesel price stands at 103.0 cents a litre, up 2.9 cents a litre over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 130.1c/l; Melbourne 113.8c/l; Brisbane 138.6c/l; Adelaide 112.0c/l; Perth 109.2c/l; Hobart 123.1c/l; Darwin 115.6c/l; and Canberra 121.1c/l.

• Last week the key Singapore gasoline price rose by US70 cents or 1.5 per cent to US$46.80 a barrel after rising by 9.5 per cent in the previous fortnight. In Australian dollar terms, the Singapore gasoline price rose by US39 cents or 0.6 per cent to $64.15 a barrel or 40.35 cents a litre after rising by almost 7 per cent in the prior fortnight.

Used vehicle market

• Over the week to November 23, Datium Insights reported:

“Prices were up this past week (+2.6 per cent) with ex-councils leading the increase (+7.9 per cent).

Light commercial (+3.4 per cent) and SUV’s (+3.8 per cent) led the increases.

Supply was up (+16.4 per cent) with ex-government (+93.8 per cent) driving increased supply.

Clearance rates were down (-2.5 per cent) but are still at historic highs.

Prices for top 15 traded vehicles were largely positive with the Holden Commodore (+7.1 per cent) and Mazda CX-5 (+5 per cent) seeing the largest increases.

Stock still remains considerably low.”

‘Flash’ IHS Markit Purchasing Managers’ Indexes (PMI) – November

• The IHS Markit ‘flash’ PMI for manufacturing rose from 54.2 to a 35-month high of 56.1 in November. The services PMI lifted from 53.7 to 4-month high of 54.9. The composite PMI rose from 53.5 to a 4-month high of 54.7. Readings above 50 indicates an expansion in activity.

• According to IHS Markit economists, “Latest PMI data showed the expansion in the Australian private sector economy strengthened midway through the fourth quarter as containment measures were eased further. Business activity growth accelerated in November, led again by the service sector. Inflows of new business rose further, but at a noticeably slower rate when compared to output. Business sentiment continued to improve and was the strongest for over two years as more firms anticipated further recovery momentum to boost business activity. However, operating capacity remained in surplus, partially linked to renewed jobs growth. Employment rose for the first time in ten months. On the price front, input cost inflation accelerated, contributing to a renewed rise in output charges.”
Resources and Energy projects

• The Department of Industry, Science, Energy and Resources has released the 2020 edition of the Resources and Energy Major Projects publication, an annual census of Australian resources and energy projects in the investment pipeline.
“This year the list includes 335 development projects. Australia’s resources and energy investment pipeline has grown, with more projects across the early stages, from first announcements to final investment decisions (FIDs). The value of committed projects (where an FID has been taken) has increased over the past year, marking a turning point in the mining investment cycle.”

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. Datium Insights and Moody’s Analytics also compile a monthly wholesale used car price series. 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.

• IHS Markit undertakes a survey of purchasing managers across manufacturing and services sector. The ‘flash’ or ‘early/preliminary ’readings provide timely information on the economy. As such, the survey is valuable for investors.

What are the implications for investors?

• Filling up the car with petrol is the single biggest weekly purchase by most Aussie families. Petrol prices are still well down for this time of the year compared with previous years, but pump prices are set to trend modestly higher. World crude oil prices have lifted on optimism about the potential for an effective vaccine to be rolled out, potentially boosting demand. But putting a cap on prices is the rising number of coronavirus cases across Europe and the US. The next OPEC+ meeting looms large on November 30-December 1.

• Motorists in regional areas are doing better than their cousins in the city in meeting the cost of filling their cars with petrol. Nationally, unleaded petrol is on average 8 cents a litre cheaper in regional areas than capital cities. Cheapest regional towns for petrol include Muswellbrook (NSW) 102.1c/; Hamilton (Vic) 106.7c/l; and Murray Bridge (SA) 106.8c/l.

Published by Craig James, Chief Economist, CommSec