After weak indicators for Australian car sales, jobs and wages, but a strong showing for retail sales, it’s time for the release of one of the top tier bits of data – the quarterly consumer price index on Wednesday.
Again like so many bits of data and corporate reports, the latest CPI – both headline and underlying – will be backward-looking into the first three months of 2020 and not give us any real feel for what has so far happened in the first month of the new quarter.
We will have to wait a while to get a sense of what has been happing in the economy in April and the June quarter.
But the CPI report – both headline and underlying – will be of academic interest really – the Reserve Bank and economists expect the CPI on both measures to fall sharply this quarter, but we won’t know that result until late July.
Still, economists expect the headline reading will be very low – around zero, perhaps 0.1% or a negative 0.1% from the three months to December.
The annual rate will ease to around 1.7% from 1.8% in 2019, according to the AMP’s Chief Economist, Dr. Shane Oliver.
Behind the dip will be lower petrol prices, lower airfares (no airfares in many cases).
Dr. Oliver says “Prices for clothing and household equipment will likely also fall but food prices likely rose amidst the bushfires, drought and panic buying so underlying inflation is likely to come in around 0.3% QoQ or 1.5% YoY.”
“June quarter inflation will be far more interesting though with a collapse in petrol prices, free childcare, falling rents, freezes or rebates on many government charges and discounting in the face of a collapse in consumer demand.”
Dr. Oliver says that is “likely to see the CPI fall by around -2% quarter on quarter which will result in an annual decline of -0.9% year on year which will be the biggest fall in average consumer prices since a 1.3% fall over the year to the June quarter in 1962.
“Underlying inflation (watched by the Reserve Bank) will likely remain positive, but it will likely also fall”
In other data releases the March credit growth data will be out on Thursday and is expected to show a noticeable slowing. House prices are out on Friday and Dr. Oliver forecasts a rise of 0.3% last month. But the trend will be weaker.
And the final April survey of Australian manufacturing will be out on Friday (like those elsewhere) and the news will be gloomy as last week’s flash result showed.
