Retail trade; skilled vacancies; Petrol prices; Used cars; Inflation; China inflation
Retail trade: Retail trade rose 7.1 per cent in November to be up 13.3 per cent on the year. The preliminary release had previously showed a 7 per cent lift in retail trade for the month.
¾ Fuel prices: Last week the national average price of unleaded petrol fell by 2.4 cents to a 5-week low of 119.8 cents a litre (c/l), according to the Australian Institute of Petroleum.
¾ Used car prices: Datium Insights reported that wholesale used car prices were up in the first week of 2021 (+2.7 per cent) with passenger vehicles (+5.4 per cent) leading the way.
¾ China inflation: Consumer prices rose by 0.2 per cent in the year to December (survey: +0.1 per cent) after falling 0.5 per cent in the year to November. Prices rose 0.7 per cent in the December month (survey: +0.4 per cent). Producer prices fell 0.4 per cent in the year to December (survey: -0.8 per cent) after falling 1.5 per cent in the year to November.
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¾ Skilled job vacancies: The National Skills Commission reported that preliminary skilled internet vacancies rose by 1.4 per cent in November to be up 11.1 per cent on the year. Vacancies are at 17-month highs.
¾ Melbourne Institute inflation gauge: Headline measure up 0.5 per cent in December to be up 1.5 per cent on a year ago. The trimmed mean rose 0.1 per cent in the month to be up 0.4 per cent on a year ago.
Retail trade data is important for consumer-focussed companies. Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. Job ads/vacancies are an important gauge on the direction of consumer spending. Used car prices can highlight changes in wealth and borrowing capacity.
What does it all mean?
· Demand and supply for oil remain reasonably balanced. Demand is restrained by the high and rising number of global Covid-19 cases, restricting mobility and therefore demand for fuel. But there is optimism that crude demand may pick up in coming months should vaccines be successful in suppressing case numbers. The voluntary cut in crude oil supply by Saudi Arabia supported crude prices in the past week. Based on a more positive outlook, Brent rose by 8.1 per cent last week and Nymex rose by 7.7 per cent to 11-month highs.
· Petrol is relatively cheap now, but it is likely to get dearer. In Australian dollar terms the Singapore gasoline price has risen around 4 cents a litre in the past month. So the Australian average unleaded price is likely to lift to the 125-130 cent per litre range in the next fortnight from 120-125 cents. Sydney, Melbourne and Adelaide prices are most vulnerable given that they are at, or near, the low-point of the discounting cycle.
· Economy-wide inflation has probably bottomed, but without a much tighter job market it will be difficult for annual inflation to sustainably breach 2 per cent. Still, prices bear watching, especially given that cost pressures have been identified in some of the purchasing manager surveys of late.
· Consumers are continuing to spend freely. A raft of factors is supporting spending including a recovering job market, Federal Government payments, the diversion of pent-up spending from international travel to domestic goods and services, low interest rates and a firmer Aussie dollar.
What do the figures show?
Weekly petrol prices
· Last week the national average price of unleaded petrol fell by 2.4 cents to 119.8 cents a litre (c/l) according to the Australian Institute of Petroleum. Metropolitan prices fell by 3.4 cents to 119.5c/l with regional prices down 0.4 cents to 120.3c/l.
· Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 5.9 cents to 115.5 c/l), Melbourne (down by 5.2 cents to 117.6 c/l), Brisbane (down by 11.0 cents to 120.8 c/l), Adelaide (up by 18.4 cents to 131.4 c/l), Perth (up by 0.4 cents to 120.3 c/l), Darwin (up by 0.4 cents to 116.2 c/l), Canberra (up by 0.5 cents to 123.2 c/l) and Hobart (up 0.3 cents to 124.2 c/l).
· The smoothed gross retail margin (2-month rolling average) for unleaded petrol fell from 17.81 cents to 16.73 cents a litre (24-month average: 15.1 cents a litre).
· The national average diesel petrol price rose by 0.6 cents to 120.8 cents a litre over the past week. The metropolitan price lifted 0.8 cents to 119.7 cents a litre and the regional price was up 0.5 cents to 121.7 cents a litre.
· Last week, the national average unleaded Terminal Gate Price (TGP) was up 0.5 cents to 108.9 cents a litre. The terminal gate diesel price fell by 0.1 cents to 109.4 cents a litre.
· Today, the average unleaded TGP stands at 109.6 cents a litre, up by 0.7 cents over the week. The terminal gate diesel price stands at 109.1 cents a litre, down 0.7 cents a litre over the week.
· MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 113.9c/l; Melbourne 116.0c/l; Brisbane 117.8c/l; Adelaide 120.8c/l; Perth 112.2c/l; Hobart 124.3c/l; Darwin 116.4c/l; and Canberra 123.3c/l.
· Last week the key Singapore gasoline price rose by US$3.21 or 5.7 per cent to a 10-month high of US$59.41 a barrel. In Australian dollar terms, the Singapore gasoline price rose by US$3.50 or 4.8 per cent to $76.47 a barrel or 48.09 cents a litre.
Weekly used vehicle market – January 11, 2021
· Over the week to January 11, Datium Insights reported:
Ø “Prices were up in the first week of 2021 (+2.7 per cent) with passenger vehicles (+5.4 per cent) leading the way
Ø Supply rebounded by (+100.8 per cent) after an expectedly quiet holiday period
Ø Clearance rates also rebounded (+21.2 per cent)
Ø Prices for top 15 traded vehicles were mostly positive with the Toyota Kluger (+6.3 per cent) and Toyota Hiace (+6.8 per cent) seeing the largest increases
Ø Stock still remains considerably low.”
Retail trade – November 2020
· Retail trade rose 7.1 per cent in November to be up 13.3 per cent on the year. The preliminary release had showed a 7 per cent lift in retail trade for the month. Non-food retailing rose by 12.7 per cent in November. The annual rate climbed from 3.6 per cent to 15.0 per cent.
· Sales by chain-store retailers and other large retailers rose by 7.5 per cent in November to stand 15.5 per cent higher than a year ago.
· On the overall result, the Australian Bureau of Statistics noted:
· “The rise is led by Victoria (22.4 per cent) as Melbourne retail stores were able to trade for a full month in November. Excluding Victoria, turnover rose 2.6 per cent.”
· “Other states and territories to record an increase in turnover were Queensland (4.5 per cent), New South Wales (2.3 per cent), Western Australia (1.2 per cent), Tasmania (3.4 per cent), the Australian Capital Territory (2.5 per cent), and the Northern Territory (2.2 per cent). The brief lockdown in South Australia (-0.2 per cent) led to a relatively flat result, as falls in most industries were offset by a rise in food sales.”
· “At the industry level, rises were recorded in household goods retailing (12.7 per cent), clothing, footwear and personal accessory retailing (26.7 per cent), other retailing (7.9 per cent), department stores (21.1 per cent), and cafes, restaurants and takeaway food services (6.7 per cent) in November 2020. The release of new games consoles and new iPhones added to sales in household goods and other retailing, while Black Friday sales also contributed to the increase across a number of industries.”
· “Online sales made up 11.0 per cent of total retail turnover in November 2020, compared to 10.4 per cent in October 2020. In November 2019, online retail turnover contributed 7.2 per cent to total retail.”
Job vacancies – December 2020
· The National Skills Commission reported that preliminary skilled internet vacancies rose by 1.4 per cent in December to be up 11.1 per cent on the year. Vacancies are at 17-month highs.
· Skilled vacancies by state/territory: NSW (up 0.2 per cent); Victoria (down 2.7 per cent); Queensland (up 2.3 per cent); South Australia (up 6.3 per cent); Western Australia (up 2.4 per cent); Tasmania (up 1.6 per cent); Northern Territory (up 5.7 per cent); ACT (up 4.3 per cent).
Inflation gauge – December 2020
· The headline measure of the Melbourne Institute inflation gauge rose 0.5 per cent in December to be up 1.5 per cent on a year ago. It was the highest annual price growth in nine months. The trimmed mean measure was up 0.1 per cent in the month to be up 0.4 per cent on a year ago (fastest annual growth in five months).
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.
· The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
What are the implications for investors?
· Crude oil prices have lifted from the lows. Local petrol prices are likely to follow, giving retailers pause for thought.
· The good economic news continues to flow – there are more signs of a job market recovery and retail spending is healthy.
· Inflation remains low in Australia, but upside influences outnumber downside influences. This is a watching brief for now. December quarter consumer prices data is due on January 27. Petrol prices were flat in the quarter and won’t contribute to overall inflation in the period.
Published by Craig James, Chief Economist, CommSec