Record trade surplus; Still savings for motorists

Weekly Petrol Prices; Preliminary trade data

Petrol prices: According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 1.5 cents last week to 109.8 cents a litre, reflecting the discounting phase for petrol in Sydney, Melbourne and Brisbane. Aussies are currently saving $65-70 a month on filling up the car with petrol compared with early this year.

Preliminary foreign trade: According to the Bureau of Statistics (ABS), in original terms, exports of goods stood at $31.4 billion in April, up 1.0 per cent from a year ago. And imports of goods rose totalled $23.1 billion in April, down 7.1 per cent from a year ago.

Rolling trade: The rolling annual goods trade surplus rose from $75.49 billion to a record $77.55 billion in April. A year ago the surplus was just $44.6 billion.

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. The trade data is important for businesses exposed to currency movements.

What does it all mean?

• The days of super-cheap petrol appear over for now, but prices still remain very attractive for motorists. In Australian dollar terms, Singapore gasoline has lifted over 16 cents a litre from recent lows. The wholesale price in Australia (terminal gate price) has also lifted 16 cents a litre over the past month. The Australian average retail price fell as low as 98.3 cents a litre in the week to May 3. But in the period since prices have lifted 11.5 cents a litre.

• Simply, the world is coming out of lockdown. That means more people are on the road – or expected to take to the road – and that means more demand for fuel. The OPEC+ oil nations are also in the process of trimming supplies to the oil market, again putting upward pressure on prices. But there is still a long way to go. Before COVID-19 emerged – in early January – Nymex crude was US$63 a barrel. Today, crude is near US$33 a barrel. So while oil prices have lifted from lows, they remain well below what we used to call “normal”.

• In early January this year – just over five months ago – petrol was near $1.50 a litre in Australia. Today Aussie motorists are paying near $1.10 a litre. That represents savings of $65-70 a month when filling up at the bowser. Given that petrol is the single biggest weekly purchase for most households, those savings are valuable as Aussies navigate these uncertain times.

• The Bureau of Statistics continues to provide timely data so we can get an up-to-date picture on the economy. And the fresh record high for the annual goods trade shows the strong position of Aussie exports. Australia is more than paying its way, assisted by our competitive currency.

What do the figures show?

Petrol prices

• According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 1.5 cents to 109.8 cents a litre. The metropolitan price fell by 2.3 cents to 109.2 cents a litre but the regional price was up by 0.1 cents to 111.0 cents a litre.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 3.7 cents to 109.9 c/l), Melbourne (up by 1.0 cents to 112,6 c/l), Brisbane (down by 6.8 cents to 109.3 c/l), Adelaide (down by 8.9 cents to 99.3 c/l), Perth (up by 3.1 cents to 106.0 c/l), Darwin (down by 2.1 cents to 110.7 c/l), Canberra (up by 3.6 cents to 105.2 c/l) and Hobart (down by 0.2 cents to 120.7 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol fell from 23.74 cents a litre to 21.09 cents in the past week (24-month average: 14 cents a litre).

• The national average diesel petrol price fell by 0.6 cents to 119.0 cents a litre over the past week. The metropolitan price fell by 0.9 cents to 117.3 cents a litre and the regional price was down by 0.3 cents to 120.4 cents a litre.

• Last week the national average wholesale unleaded petrol price (terminal gate or TGP) was up by 1.7 cents to 95.6 cents per litre. Today, the average unleaded TGP stands at 97.4 cents a litre, up by 2.6 cents over the week. The terminal gate diesel price stands at 99.3 cents a litre, up by 2.5 cents over the week.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 106.8c; Melbourne 108.9c; Brisbane 105.3c; Adelaide 126.0c; Perth 98.2c; Canberra 107.3c; Darwin 110.2c; Hobart 120.5c.

• The key Singapore gasoline price rose by 6.1 per cent or US$2.05 a barrel to a 10-week high of US$35.85 a barrel last week. In Australian dollar terms, the Singapore gasoline price rose by $2.45 or 4.70 per cent to a 10-week high of $54.81 a barrel or 34.47 cents a litre.

Preliminary international trade – April

• Details according to the Bureau of Statistics (ABS) in original, current price terms:

Preliminary exports

• “Exports of goods in April 2020 decreased from the revised March 2020 estimate of $35,797m by $4,353m (-12 per cent) to $31,443m.

• The decrease in the value of exports in April 2020 follows the record high exports value observed in March 2020.

• The decrease in April 2020 was driven by exports of Non-rural goods, down $2,341m (-8 per cent); and Non-monetary gold, down $1,694m (-47 per cent).

• Within Non-rural goods, there were significant decreases in exports of Metalliferous Ores (including Iron ore), down $456m (-4 per cent); Coal, down $412m (-8 per cent); and Petroleum, down $292m (-31 per cent).

• The decrease in exports of Non-monetary gold was driven by a drop in exports to the United Kingdom and Hong Kong, following significant exports to both of those countries in March 2020.

• Despite the month-on-month fall in exports, Australian exports remain strong due largely to ongoing demand for Australian resource commodities, in particular Iron ore from major trading partners across Asia, and Gas.

• Year-on-year, exports increased $301m (1 per cent) when compared to April 2019.”

Preliminary imports

• “Imports of goods in April 2020 decreased from the revised March 2020 merchandise trade estimate of $24,448m by $1,327m (-5 per cent) to $23,121m.

• This decrease in the value of imports was driven by imports of Intermediate and other goods, down $628m (-6 per cent); Non-monetary gold, down $449m (-42 per cent); and Capital goods, down $415m (-7 per cent)

• Within Intermediate and other goods, there were significant decreases in imports of Petroleum; Medicinal & pharmaceutical products; and Power generating machinery.

• Within Capital Goods the largest decreases were in Other transport equipment (including aircraft); and Telecommunications and sound equipment both following strong import values in March 2020. Offsetting these decreases, imports of Office and ADP machinery increased by more than 40 per cent.

• While imports decreased overall, imports from China continued to rebound in April 2020 after decreases were observed at the beginning of 2020.

• Year-on-year, imports in April 2020 decreased by $1,762m (-7 per cent) on April 2019. This decrease is predominantly due to decreases in imports of Petroleum and Road vehicles.”

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 International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.

What are the implications for investors?

• Demand for fuel is lifting. But these are early days. Some nations will be successful in emerging from lockdown. Others will have false starts. So the outlook for energy stocks is only “cautiously optimistic”.

• For retail stocks, petrol prices are still historically low, so the savings at the petrol pump are still valuable in supporting consumer spending.

• The traded goods sector goes from strength to strength. Despite all manner of challenges, Australian goods remain in high demand across the globe, especially our iron ore and gas.

Published by Craig James, Chief Economist, CommSec