Volatile home and petrol prices: Craig James

Volatile home and petrol prices: Craig James
Volatile home and petrol prices: Craig James
GUEST OBSERVER
 
The CoreLogic Home Value Index of capital city home prices rose by 1.0 per cent in September to stand 7.1 per cent higher over the year. Prices rose in all capital cities except Perth and Darwin. But regional prices were only up 1.4 per cent in the year to August (latest data).
 
Petrol: Today the national average wholesale (terminal gate) unleaded petrol price stands at 106.8 cents a litre, down 0.5 cents a litre over the week after falling by 0.9 cents in the previous week.

Capital cities: MotorMouth records the following retail prices for capital cities today: Sydney 122.6c; Melbourne 125.7c; Brisbane 107.5c; Adelaide 116.1c; Perth 103.5c; Canberra 118.7c; Darwin 109.8c; Hobart 121.7

Manufacturing: The Performance of Manufacturing index rose by 2.9 points to 49.8 in September. A reading below 50.0 indicates that the sector is contracting. 

It is clear that there is no single housing market. And for that matter, there is no single market for petrol. Housing prices are responding to the different population or demand influences as well as the different stages of the building cycle. Demand for homes in Sydney and Melbourne is supported by solid population growth while supply hasn’t caught up. Not yet, anyway – the process is underway. In contrast the increased supply of new homes in Perth is happening at a time of softening population growth. There have always been different cycles across the country and this time is no different.
 
Looking at the simple national dwelling price (capital cities and regions) on a three-month rolling average basis, home prices are up just 1 per cent over the past year. Looking over a 25-year period, annual price growth has averaged around 6 per cent. Over the last five years, annual growth was nearer to 3 percent.
 
The jury is still out on petrol prices. OPEC oil producers are seeking to limit production and support prices. But many doubt that the moves will be effective given significant global oil supplies and the lack of agreement to stem output outside of the OPEC grouping.
 
Manufacturers are being influenced by a range of positive and negative forces at present. The higher Aussie dollar isn’t helping producers but they are benefitting from the stronger demand now that Brexit and the election are out of the way.
 
What do the figures show?
 
Volatile home and petrol prices: Craig James
 
 
Home prices
 
The CoreLogic Home Value Index of capital city home prices rose by 1.0 per cent in September and was up 7.1 per cent over the year.

In regional Australia, house prices fell 0.1 per cent in August and were just 1.4 per cent higher than a year ago. 
(regional prices cover just houses and data is up to the end of August). 


In capital cities, house prices rose by 1.0 per cent in September while apartment prices rose by 1.2 per cent. House prices were up 7.3 per cent on a year ago and apartments were up by 6.1 per cent. 


 The average Australian capital city house price (median price based on settled sales over quarter) was $600,000 and the average unit price was $510,000.

 Dwelling prices rose in six of the eight capital cities in September: Canberra (up 2.4 per cent); Melbourne (up 2.3 per cent); Adelaide (up 2.1 per cent), Sydney (up 0.8 per cent); Brisbane and Hobart (both up 0.1 per cent). Prices fell most in Perth (down 2.5 per cent) followed by Darwin (down 2.2 per cent). 


 Home prices were higher than a year ago in six of the eight capital cities. Prices rose most in Sydney (up 10.2 per cent); followed by Melbourne and Canberra (both up 9.0 per cent); Hobart (up 8.7 per cent); Adelaide (up 6.5 per cent); and Brisbane (up 3.0 per cent). Prices fell in Darwin (down 6.0 per cent) and Perth (down by 7.0 per cent). 


Total returns on capital city dwellings in the year to September rose by 10.9 per cent with houses up 10.9 per cent on a year earlier and units up 10.6 per cent. 


Petrol prices

Today the national average wholesale (terminal gate) unleaded petrol price stands at 106.8 cents a litre, down 0.5 cents a litre over the week after falling by 0.9 cents in the previous week. The terminal gate diesel price stands at 104.2 cents a litre, up by 0.3 cents a litre after falling by 1.1 cents a litre over the previous week. 


Last week the key Singapore gasoline price rose by US$1.60 or 2.7 per cent to US$60.20 a barrel. In Australian dollar terms the Singapore gasoline price rose by $2.17 a barrel or 2.8 per cent to a 16-week high of $78.90 a barrel or 49.62 cents a litre. 


MotorMouth records the following retail prices for capital cities today: Sydney 122.6c; Melbourne 125.7c; Brisbane 107.5c; Adelaide 116.1c; Perth 103.5c; Canberra 118.7c; Darwin 109.8c; Hobart 121.7c. 


In the September quarter Australian petrol prices fell by between 2-3 per cent after lifting 5.9 per cent in the June quarter. As such, lower petrol prices are keeping downward pressure on the overall inflation rate. 


Click to enlarge

Volatile home and petrol prices: Craig James

Performance of Manufacturing.

The Performance of Manufacturing index rose by 2.9 points to 49.8 in August. A reading below 50.0 indicates that the sector is contracting. Before August the index had been above 50 for 13 months – the longest period of expansion since September 2006. 


AIG notes “Three of the seven activity sub-indexes in the Australian PMI® expanded in September after contracting in August. Production (52.6 points), deliveries (56.4 points) and sales (51.4 points) expanded and exports stabilised (50.0 points). Employment (46.7 points) and stocks (44.3 points) contracted again. New orders slipped into contraction (48.3 points).” 


“Comments from manufacturers in September indicate a steady improvement in demand and exports in some sectors after last month’s dip. Variability in the exchange rate and persisting oversupply in some markets is curbing activity. Margin pressures appear to be intensifying due to ongoing high input costs (particularly for imported inputs and energy). Lower government orders, the sharp fall-off in mining construction work and the completion of major infrastructure projects (with no imminent replacement projects in the pipeline) and wet weather in some locations has also dampened activity.” 


What is the importance of the economic data?

Weekly figures on petrol prices 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's 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 CoreLogic Hedonic Australian Home Value Index is based on Australia’s biggest property database. Unlike the ABS Index, which excludes terraces, semi-detached homes and apartments, the CoreLogic Hedonic Index includes all properties. Home prices are an important driver of wealth and spending.

The Australian Industry Group compiles the Performance of Manufacturing Index (PMI) each month. The Australian PMI is the Australian equivalent of the US ISM manufacturing gauge. The PMI is one of the timeliest economic indicators released in Australia. The PMI is useful not just in showing how the manufacturing sector is performing but in providing some sense about where it is heading. The key ‘forward looking’ components are orders and employment.

What are the implications for interest rates and investors?

Petrol prices are likely to remain volatile, reflecting discounting cycles and the push and pull of global factors. But overall, prices are likely to remain affordable compared with previous years. As such, the price of petrol is not having a big impact on consumer spending – more of a benign influence.
 
There is a fair debate on the accuracy of home price data. The bottom line is that prices are moving at different speeds across the country depending on the usual supply-demand influences. Recent trends aren’t a cause for concern. Using averages of settled sales across the entire country, prices are barely growing in annual terms.
 
Latest data shows that the Australian economy remains in good shape. 
 
Volatile home and petrol prices: Craig James
 
Craig James is the chief economist at CommSec.

 

Craig James

Craig James

Craig James is the Chief Economist at CommSec, interpreting ‘big picture’ economic and financial trends.

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Residential Market Home Prices

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