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Finally! Relief in sight for motorists
NAB Business Survey; Weekly Petrol Price; Job Ads
- According to the Australian Institute of Petroleum,
the national average Australian price of unleaded petrol rose by 1.3
cents per litre to 145.9 cents a litre in the week to May 8 –
the highest level in 30 months.
- In
Australia the terminal gate (wholesale) price hit fresh 30-month highs,
however given slide in global oil prices it is likely that the terminal
gate price has peaked. CommSec believes petrol prices could
fall around 8-10 cents a litre over the next fortnight or so - saving
motorists at least $7 every time they fill up the car.
- The NAB business confidence index eased from +9.1 to +6.8 in April. The business conditions index also recorded a weaker reading, falling from +9.4 to +4.6 in April. Forward
looking sub-indices were disappointingly weaker. Profits slumped, while new orders fell back into contractionary territory.
- Job market is likely to tighten at a modest pace in coming months. The ANZ job ads index rose by a 1.0 per cent in April after a 1.3 per cent rise in the prior month.
What does it all mean?
- There is great news
ahead for motorists. Prices are holding at fresh 30-month highs however
it is likely that conditions will improve from here. Global oil prices
have slumped in the past week, with the Singapore
unleaded price falling by the biggest weekly margin since September
2009, and as a result motorist are in for some massive savings at the
pump in just over a fortnights time.
- The
global oil market has been well supplied despite the Middle East
tensions and the past week has seen a return to fundamentals rather than
speculation. The upcoming OPEC meeting in June has also been a key
factor in driving prices lower, with OPEC member nations looking at
potentially increasing oil supply in coming months. Overall CommSec
expects prices to track sideways over the coming week before sliding by
around 8-10 cents a litre in the following fortnight.
- Businesses
have weathered a storm of negative influences over the past year, from
rate hikes to the lack of consumer spending and even disastrous weather
conditions. Added to which the strength of the Australian
dollar continues to hamper inbound tourism and export orientated
sectors. Given all these mitigating factors it is hardly a surprise that
business conditions and confidence remain relatively subdued.
- The
weakness in consumer spending, a slowdown in housing construction, and
the multiple interest rate hikes of last year have all taken their toll
on business confidence and conditions. Key forward looking sub-indices
all continue to suffer. The profitability index remains weak while the
all important forward orders index is once again going backwards. In
fact the new orders sub-index has been contracting for nine out of the
past 12 months. It’s clear, that outside of the
mining sector business owners are still trimming future orders, and this
is likely to remain the case as long as profitability continues to
remain weak.
- Given
that retailers are aggressively discounting, borrowing costs are rising,
and the higher Aussie dollar is curbing manufacturing exports, it is
likely that overall activity will remain subdued in the near
term. Added to which the higher oil price will also feed straight
through to petrol prices adding a further burden on household budgets
and consumption. The negative momentum is clearly why the Reserve Bank
slashed near term growth forecasts in its Statement
on Monetary Policy. CommSec expects the next rate hike to take place in
August.
- It is not all bad news.
In fact the longer term prospects for the Australian economy are
certainly more optimistic. And if interest rates remain on hold over the
next couple of month’s businesses and consumers
can once again focus on investment and activity. The rebuilding phase
following the floods and cyclone, should result in growth and activity
rebounding quite dramatically in the second half of the year.
- The labour market has
been the shining indicator over the past year and the latest job ads
data suggests that eemployment growth is likely to be remain healthy in
coming months. The ANZ job ads series has once
again shown moderate growth. Importantly while the labour market is
likely to strengthen in coming months it is unlikely to see robust
growth akin to 2010 – especially given that the domestic economy has
lost momentum in recent months.
What do the figures show?
National Australia Bank Business Survey:
- The National Australia Bank business confidence index eased from + 9.1 to +6.8 in April.
- The business conditions index fell from 9.4 to 4.6 in April.
- The
index of trading conditions recorded deteriorated in April, down from
+14.7 to +5.6; profitability fell from +10.3 to +3.6; employment
improved from +3.2 to +4.6; and forward orders fell from +3.1 to -0.1.
- The
monthly reading of labour costs rose sharply from 0.9 per cent to 1.4
per cent in April. NAB noted that annual growth of labour costs stands
at 4.4 per cent in April up from 3.7 per cent recorded in March.
- Inflationary
pressures are well contained. Retail prices were flat in April after a
0.1 per cent quarterly rise in March. Purchase costs increased by a 0.8
per cent quarterly rate, and the annual rate held steady
at 2.7 per cent.
- Capacity utilisation rose from 81.5 per cent to 81.8 per cent in April – marginally above the decade average of 81.6 per cent.
Petrol prices:
- According to the
Australian Institute of Petroleum, the national average Australian price
of unleaded petrol rose by 1.3 cents a litre to 145.9 cents a litre in
the week to May 8. The metropolitan price rose
by 1.7 c/l to 145.7 c/l, while the regional average price rose by 0.7
c/l to 146.3 c/l.
- Average
petrol prices across states over the past week were: Sydney (up 0.5
cents to 145.9 c/l), Melbourne (up 1.6 cents to 144.7 c/l), Brisbane (up
3.6 cents to 148.5 c/l), Adelaide (up 5.1 cents to 143.2 c/l),
Perth (up 0.2 cents to 145.0 c/l), Darwin (up 1.3 cents to 152.0 c/l),
Canberra (down 0.8 cents to 144.8 c/l) and Hobart (up 1.1 cents to 150.9
c/l).
- The national
average wholesale (terminal gate) rose to a fresh 30-month high of 139
cents a litre today, up by 1.4 cents a litre over the past week.
- Last week, the key
Singapore unleaded petrol price fell by US$16.30 (11.8 per cent) to
US$122.02 a barrel. In Australian dollar terms the Singapore gasoline
price fell by $12.87 (10.1 per cent) over the week
to $114.06 a barrel.
Job advertisements:
- The combined number of internet and
newspaper job advertisements, as tracked by ANZ, rose by 1.0 per cent in
April after a 1.3 per cent increase in March. Internet job ads rose by
1.2 per cent in the month, while newspaper job
ads fell by 3.4 per cent. In annual terms job ads are up 20.5 per cent.
What is the importance of the economic data?
- The monthly National Australia Bank business survey
is valuable in providing a timely reading on the health of Corporate
Australia. Key indicators of business conditions such as orders,
employment, profitability
and capacity use are covered together with a gauge on confidence levels.
- Weekly figures on petrol prices
are compiled by ORIMA Research on behalf of the Australian Institute of
Petroleum. National average retail prices are calculated as the
weighted average of each State/Territory's
metropolitan and non-metropolitan retail petrol prices, with the weights
based on the number of registered petrol vehicles in each of these
regions.
- 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.
What are the implications for interest rates and investors?
- The longer term
prospects for the Australian economy remain robust. And if interest
rates remain on hold over the next couple of month’s businesses and
consumers will once again focus on investment and activity.
The rebuilding phase following the floods and cyclone, should result in
growth and activity rebounding quite dramatically in the second half of
the year.
- The
labour market will be one of the key hot issues that the Reserve Bank
will be focusing on in coming months. As long as the supply of labour
remains adequate, the Reserve Bank can remain on the interest rate
sidelines.
- CommSec expects the next rate hike to take place in August.
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