Soaring Sydney petrol prices; Flat used car prices

China’s retail spending slows amid virus flare ups
Petrol prices; Used car prices; China economic data

• Fuel prices: Last week the national average price of unleaded petrol rose by 1.8 cents a litre to 143.0 cents per litre (c/l), according to the Australian Institute of Petroleum. But pump prices have spiked to 171.9 cents a litre in some Sydney suburbs today, according to real-time fuel app MotorMouth.

• Used car prices: Used vehicle prices rose by 0.2 per cent last week with supply up 8 per cent.

• China monthly activity data: Retail sales expanded at a 17.7 per cent annual rate in April (consensus: +25 per cent). Industrial production rose at a 9.8 per cent annual rate (consensus: +10 per cent). Fixed-asset investment expanded by 19.9 per cent in the first four months of 2021 from the same period a year earlier (consensus: +20 per cent).

• The Chinese unemployment rate fell from 5.3 per cent in March to 5.1 per cent in April (consensus: 5.2 per cent).

• China’s new home prices rose by 0.6 per cent in April. Prices lifted 4.8 per cent in in the first four months of 2021 from the same period a year earlier after lifting at a 4.6 per cent annual rate in March.

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 Chinese data is important for exporters, especially rural producers, consumer goods, mining and energy companies.

What does it all mean?

• Sydneysiders heading to work and on the school run this morning would’ve received a rude shock. Unleaded petrol prices have spiked in large swathes of the Harbour City with some servos charging 171.9 cents a litre. The average retail unleaded pump price is currently 136.7 cents a litre, according to real-time fuel app MotorMouth, so motorists should fill up at this level or below before retailers hike prices. During the expensive phase of the fuel cycle motorists should consult fuel apps and conserve cash by topping up rather than filling up their tanks.

• Average unleaded retail petrol prices are hovering around 155 cents a litre today in Melbourne. Pump prices are beginning to ease after hitting peaks of 157.6 cents a litre last week, but motorists should top-up rather than fill up with prices remaining elevated over the remainder of the week.

• South-East Queensland has entered the cheap phase of the retail fuel cycle. While unleaded pump prices are averaging about 142 cents a litre today in Brisbane, prices are already below 130 cents a litre in Acacia Ridge, Cooper Plains, Eight Mile Plains, Rocklea and Underwood.

• China’s solid economic expansion extended into the June quarter with retail spending, production and investment all posting solid gains in April. That said, growth rates eased due to pandemic distortions and base effects when compared to activity a year ago amid continuing demand-supply imbalances.

• Chinese industrial activity remains robust, supported by strong external demand for Chinese goods as vaccinations accelerate in developed countries. But continuing global supply chain disruptions – including a semiconductor shortage – and surging commodity prices have sapped some momentum as production costs increase. Chinese exporters have begun passing on higher costs to customers around the world as cost-push inflationary pressures build globally. Data on Friday showed that the prices of Chinese goods imported by the US lifted 2.1 per cent for the year ended in April, the strongest annual growth rate in 9 years.

• China’s Ching Ming festival holidays in early April failed to spur an increase in retail spending. In fact, the annual growth rate of sales almost halved in the first four months of 2021 to a 17.7 per cent rate after surging 34.2 per cent in the first three months of the year when compared with a year ago. Consumer caution and persistent virus outbreaks continue to hamper the demand-side recovery with the National Health Commission reporting 25 new Covid-19 cases yesterday, up from 18 cases the prior day – the biggest daily lift in over six weeks. But on a more positive note, China’s jobless rate eased to 5.1 per cent – the lowest level since 2019.

What do you need to know?

Weekly petrol prices

• Last week the national average price of unleaded petrol rose by 1.8 cents a litre to 143.0 cents per litre (c/l) according to the Australian Institute of Petroleum. Metropolitan prices lifted 1.9 cents to 144.0 c/l and regional prices were up by 1.5 cents to 140.9 c/l.

• Average unleaded petrol prices across states and territories over the past week were: Sydney (-0.4 cents to 134.9 c/l), Melbourne (+17.3 cents to 154.7 c/l), Brisbane (-9.9 cents to 150.1 c/l), Adelaide (-10.6 cents to 131.2 c/l), Perth (+0.6 cents at 139.5 c/l), Darwin (flat at 139.8 c/l), Canberra (flat at 140.1 c/l) and Hobart (+0.4 cents to 144.3 c/l).

• The smoothed gross retail margin (2-month rolling average) for unleaded petrol rose from 15.21 cents per litre to 15.61 cents a litre (24-month average: 15.91 cents a litre).

• The national average diesel petrol price rose by 0.4 cents to 135.0 cents a litre over the past week. The metropolitan price was up 0.4 cents to 133.6 cents a litre with the regional price up 0.5 cents a litre to 136.3 cents a litre.

• Last week, the national average unleaded Terminal Gate Price (TGP) was up by 1.4 cents to 127.7 cents a litre. And the terminal gate diesel price rose by 1.9 cents to 123.8 cents a litre.

• Today, the average unleaded TGP stands at 127.0 cents a litre, down 0.9 cents over the week. But the terminal gate diesel price was up 0.5 cents from a week ago to 123.9 cents a litre.

• MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 136.7c/l; Melbourne 155.4c/l; Brisbane 141.8c/l; Adelaide 156.8c/l; Perth 129.1c/l; Hobart 144.3c/l; Darwin 140.0c/l; and Canberra 140.1c/l.

• Last week the key Singapore gasoline price fell by US$2.80 or 3.7 per cent to US$73.50 a barrel. In Australian dollar terms, the Singapore gasoline price fell by $3.10 or 3.2 per cent to $95.01 a barrel or 59.75 cents a litre.

Weekly used vehicle market – May 17

• Datium Insights have reported the following results for the week to May 17:

• “Prices were largely flat the past week (+0.2 per cent) with Passenger vehicles (+3.4 per cent) leading the increases

• Supply rebounded from last week (+8 per cent)

• Clearance rates also saw an increase (+5.1 per cent)

• Prices for the top 15 traded vehicles were mixed with the Holden Colorado (+3.8 per cent) and Toyota Rav4 (+3.8 per cent) seeing the largest increases

• Stock still remains considerably low.”

China economic data – April

• Retail sales expanded at a 17.7 per cent annual rate in April (consensus: +25 per cent), weaker than the 34.2 per cent surge in the first three months of the year. Over the year to April, spending rose the most on jewellery (+48.3 per cent), followed by restaurants & catering (+46.4 per cent), but least on household electronics (+6.1 per cent). Online retail sales soared 27.6 per cent in the first four months of 2021 from the same period a year earlier.

• Industrial production rose at a 9.8 per cent annual rate in April (consensus: +10 per cent), slower than the 14.1 per cent gain in March. Over the year to April, manufacturing output lifted by 10.3 per cent, electricity output also rose by 10.3 per cent and mining production lifted 3.2 per cent. Production rose the most for machinery (+22.6 per cent) and least for non-ferrous metals smelting and food production (both +1.4 per cent).

• Fixed-asset investment expanded by 19.9 per cent in the first four months of 2021 from the same period a year earlier (consensus: +20 per cent), slowing after expanding at a 25.6 per cent rate in the first three months of 2021 from a year earlier. Over the year to April, investment by the private sector rose by 21 per cent and investment by state-owned enterprises increased by 18.6 per cent. By industry, investment rose most for railways and ships (+44.5 per cent), but investment in car manufacturing fell by 3 per cent.

• Property investment expanded at a 21.6 per cent annual pace in the first four months of 2021 from the same period a year earlier (consensus: +20 per cent).

• The unemployment rate (nationwide survey-based jobless rate) fell from 5.3 per cent in March to 5.1 per cent in April (consensus: 5.2 per cent).

• China’s new home prices rose by 0.6 per cent in April. Prices lifted 4.8 per cent in in the first four months of 2021 from the same period a year earlier after lifting at a 4.6 per cent annual rate in March.

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 issue a monthly reading on used vehicle prices. 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.

• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economy have major implications for the Aussie economy.

What are the implications for investors?

• The US Nymex crude oil price has climbed around 0.5 per cent so far today after advancing 2.4 per cent on Friday. The Nymex rose by 0.7 per cent to US$65.37 a barrel last week – a third straight weekly gain – after a cyberattack halted the Colonial pipeline, disrupting gasoline supplies in US eastern and southern states. Investors are expecting fuel demand and consumption to increase in the Northern Hemisphere summer driving season as Covid-19 vaccination rates accelerate and government virus restrictions ease.

• The Federal Government has today announced a $2.1 billion fuel security package to support fuel refineries with a focus on improving infrastructure and fuel quality. Global oil supermajors BP and Exxon Mobil have recently announced plans to cease refining operations due to weak margins. Encouragingly, Ampol said today it would keep its Lytton refinery in Queensland open until at least mid-2027. And Geelong-based refiner, Viva Energy, also welcomed the package. At the time of writing shares of Ampol and Viva Energy were both up around 5 per cent following the announcement.

• China’s economic expansion has momentum, but officials are beginning to clamp down on soaring raw materials and property prices. The National Bureau of Statistics said today that China’s economic recovery is likely to continue in the second half of 2021, supported by stronger overseas demand, improved consumption and supportive policy measures.

• But officials warned that pressures on industrial companies will need to be countered by “effective measures.” Already iron ore prices have slumped at least 10 per cent after hitting record highs last week as Chinese Premier Li Keqiang urged steelmakers to cap price gains. And policymakers also seem keen to take the steam out of rising property prices with national real estate tax on the government’s agenda. That said, China’s stimulus-fueled building boom is unlikely to ease until the wet season starts in June, while developed world governments are stimulating their economies through massive infrastructure projects.

Published by Ryan Felsman, Senior  Economist, CommSec