The Reserve Bank will almost certainly pause its rate rises at its April monetary policy meeting next Tuesday after the monthly inflation indicator for February showed an improvement in falling to an 8-month low.
The Australian Bureau of Statistics monthly measure of inflation showed consumer prices growing 6.8% in the year to February, down from the 7.4% rate in January and the December peak of 8.4%.
It was also lower than the Consumer Price Index reading for the December quarter of 7.8%.
The monthly CPI index rose 0.2% in February, from January. Prices excluding volatile fruit, vegetables and fuel rose 6.9% in the year to February, down from 7.5% in January while excluding holiday costs only, prices rose 6.65%down from 6.8% in January.
The data came after weak retail trade figures for February confirmed that household spending remains very soft with retail sales only rising 0.2% from January and remaining 2% under the peak in November.
The ABS’ head of prices statistics Michelle Marquardt said in Wednesday’s release that there were signs of price growth abating.
“This marks the second consecutive month of lower annual inflation, also known as ‘disinflation’, from the peak of 8.4 per cent in December 2022,” she said.
The most significant contributors to the annual increase seen in February were Housing (+9.9%), Food and non-alcoholic beverages (+8.0%), Transport (+5.6%) and Recreation and culture (+6.4%).
The detailed data released on Wednesday shows that the continuing drivers for inflation remain product and supply based, with company price rises playing a big part.
Even the lowest rate of growth in transport (petrol and diesel) costs in two years didn’t have the big impact that it might have had before the pandemic and then the Russian invasion of Ukraine went sent commodity prices soaring – from oil and gas to dairy products, wheat, coal, coffee etc. The prices of many of those commodities are now well below pre-invasion levels.
Ms Marquardt said, “The annual increase for the housing group in February (+9.9 per cent) was lower than January (+10.4 per cent). New dwellings grew 13.0 per cent in the 12 months to February which is the lowest annual growth since February 2022 as price rises for building materials continue to ease.
Rent costs rose again due to the tight rental market, maintaining the 4.8% annual growth recorded in January.
Growth in prices for food and non-alcoholic beverages eased slightly from an annual rise of 8.2% in January to 8.0% in February.
Meals out and takeaway food (+7.3%) was the main contributor to the annual increase, followed by Food products not elsewhere classified (+11.8%), bread and cereal products (+12.5% and dairy and related products (+14.3%).
Automotive fuel prices rose 5.6% in the year to February, down from January’s annual rise of 7.5%. While fuel prices drove the increase in transport, annual growth for fuel is the lowest it has been in two years, the ABS pointed out.
She said the added a new monthly series for electricity prices into the indicator which showed a 17.2% rise for the year to February.
Recreation and culture prices eased in February with annual growth of 6.4%, down from 10.2% in January.
“This was primarily due to Holiday travel and accommodation prices easing from an annual rise of 17.8 per cent in January to 14.9 per cent in February,” she said.
“Since rising 29.3 per cent in the 12 months to December, price rises for Holiday travel and accommodation have eased to 14.9 per cent in the 12 months to February. The easing in February follows strong demand for domestic and international airfares in December in the lead up to Christmas and prices remained high for accommodation in January during school holidays. ” Ms Marquardt said.
