Well, with the frothing and fretting about inflation after yesterday’s June quarter Consumer Price Index data, there’s one forecast that can be easily made about inflation – that one is that there will be a sharp fall in the next CPI for the current September quarter.
The Australian Bureau of Statistics said the Consumer Price Index (CPI) rose 0.5% in the June quarter 2014, slowing from the unchanged rise of 0.6% in the March quarter 2014.
That pushed the annual rate up to 3%, the top of the Reserve Bank’s range, from 2.9%.
Why it rose is beyond me. The CPI report changes nothing.
And it won’t force the RBA to do anything because the bank looks at inflation over the medium term, rather than quarter to quarter, as many worryworts among media commentators and business economists apparently do.
But don’t tell the urgers in the financial markets – the dollar bounced by 0.4% to well over 94 USc on the news when it was released at 11.30 am.
The currency hit a high of 94.39 USc, from a low of 93.81.
But with the September 2013 quarter’s high reading of a 1.2% rise dropping out of the equation for the next quarter’s report, the CPI for the year to September 30, 2014 will fall back to around 2.3% to 2.4%, if there’s a quarter rise of around 0.5% to 0.6% (the same as in the last two quarters).
In fact annualising the CPI rises for the first half of the year shows headline inflation is now slowing to an annual rate of 2.2%.
The ABS said the most significant price rises this quarter were for medical and hospital services (up 4.6%), new dwelling purchases by owner-occupiers (up 1.6%) and tobacco (up 3.1% and due to an excise rise).
These rises were partially offset by falls in domestic holiday travel and accommodation (down 3.8%), automotive fuel (down 2.7%) and telecommunication equipment and services (down 1.6%).
The 3% reading for the year to June is up from the 2.7% rate for calendar 2013, and bang on the Reserve Bank’s forecast in the May Statement of Monetary Policy.
Inflation up, will fall this quarter, RBA not alarmed
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The ABS report showed that non-tradables, or domestic inflation for goods and services that aren’t imported (fast food and power and water), rose 3.1% from the June quarter of 2013, while the cost of tradables, such as imported electrical goods and clothing, cars and motor bikes rose 2.9%
The Reserve Bank’s preferred measures of underlying inflation, the trimmed mean and the weighted median, showed rises higher than the headline rate.
The weighted median, which excludes the largest price increases and declines in a basket of goods and services, rose 0.6% in the quarter, unchanged from the March quarter. It was up 2.7% on a yearly basis, which was also unchanged.
The trimmed mean, which gets rid of bigger than expected rises and falls rose 0.8% from the previous quarter, up from 0.6%. That was an annual rate of 2.9%, up from 2.6%. That increase got the worryworts worrying.
But really, its nothing to be concerned about.
The RBA will note the report, update its graphs and data banks, and return to watching inflation and the rest of the economy, as it has been telling us it is doing for the past four months.
