Australia’s June quarter consumer price inflation report (CPI) has come in below expectations.
According to the Australian Bureau of Statistics (ABS), headline CPI grew by 0.4% in the three months to June, leaving the increase on a year earlier at 2.1%.
Markets had been expecting a quarterly increase of 0.5%, seeing the year-on-year rate lift to 2.2%.
The quarterly rate marked the seventh consecutive report that CPI undershot economist expectations.
In the year to March, CPI grew by 1.9% — so price pressures accelerated ever so slightly over the past year.
“Most of this annual growth is due to strength in fuel, electricity and tobacco,” said Bruce Hockman, Chief Economist at the ABS.
“Annual growth in prices of discretionary goods such as clothing and footwear, and furniture and household equipment remain subdued.”
This table from the ABS shows the breakdown of movements in each CPI category over the past quarter and year.
image: https://edge.alluremedia.com.au/uploads/businessinsider/2018/07/Australia-CPI-Q2-table.jpg
ABSThe largest price increases in the quarter came from automotive fuel (+6.9%), medical and hospital services (+3.1%), and tobacco (+2.8%), all areas heavily influenced by government.
In contrast, price declines were registered for domestic holiday travel and accommodation (2.7%), motor vehicles (2.0%) and vegetables (2.9%).
In contrast to prior inflation reports, most of the price pressures were driven by offshore factors during the quarter, rather than domestic influences.
Tradable prices — accounting for around 40% of the CPI basket — grew by 0.5%, faster than the 0.3% increase in non-tradable items, accounting for the remainder of the basket.
However, over the year, it’s clear that of what inflationary pressures there were, most were domestically driven with non-tradable inflation lifting by 3%, ten-times faster than non-tradables at 0.3%.
By individual state and territory, annual inflation ranged from 2.8% in Canberra to as low as 1.1% in Perth, partially reflecting divergent economic conditions across the country.
image: https://edge.alluremedia.com.au/uploads/businessinsider/2018/07/Australia-CPI-Q2-capital-city-breakdown.jpg
ABSUnderlying CPI — of more importance to official interest rate settings from the RBA — rose by 0.5% for the quarter after seasonal adjustments, seeing the year-on-year increase fall back to 1.9% from 2% in the prior quarter.
The result was in line with expectations, but fractionally below the 2% level forecast by the RBA back in May.
Year-ended underlying inflation has now undershot the RBA’s 2-3% inflation target in each of the past eleven quarters, helping to explain why the bank appears content to leave official interest rates steady for some time yet.
Source:
https://www.businessinsider.com.au/australia-inflation-q2-cpi-report-rba-interest-rates-2018-7