Well, there's real chance that tomorrow's June quarter Consumer Price Index might produce an unwelcome surprise, just as the March quarter surprised on the downside.
That's after the June quarter's Producer Price Index came in above market estimates yesterday.
According to figures from the Australian Bureau of Statistics, the PPI at the final stage of production rose 1.0 per cent in the June quarter for an annual increase of 2.3 per cent.
While that's a moderate increase, it declined from a rise of 2.8 per cent in the 12 months to March because the sharp 1.6 per cent price rise in the June quarter of last year dropped out of the comparison.
Market consensus was for a rise of around 0.8 per cent in the quarter.
This compares with an unrevised flat result in the March quarter, which helped procure the lower than forecast CPI result.
At the intermediate stage, the PPI rose 1.7 per cent in the June quarter and at the preliminary stage it was up 1.9 per cent, which is why there's a slim chance interest rates might be shoved up at next Reserve Bank board meeting, or in September.
The bank has made it clear that it looks at the passage of prices through each stage of production and not just the final stage.
Over the year to June at the intermediate stage, the PPI rose 3.4 per cent and at the preliminary stage it rose 3.3 per cent.
The one saving grace is that the pricing pressures are being wrung out of costs as they move through the three levels, so that at the final stage, the price pressures are not as strong as earlier on.
There's signs that price pressures reared their ugly head in the quarter in manufacturing, services, building and construction, and the culprit was a 10 per cent rise in the Australian dollar value of oil and associated products.
The rising price of oil and fuels was only partly offset by the strong Australian dollar in the quarter.
In the preliminary stage, the price of imported products was up strong: 4.1% according to the ABS.
And although the dollar has jumped even further since the end of June to 88c (up around four to five per cent), world oil prices have also risen and look like remaining above $US76 a barrel for much of the next few months.
Oil industry analysts can't see many reasons for oil prices to retrace their sharp decline of the second half of last year.
And there are signs of some margin pressure.
So what happened to producer prices, both domestic and imported?
Here's what the ABS said in its release yesterday:
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The PPI:
The final (stage 3) stage of production producer price index recorded a 1.0% increase in the June quarter 2007. The intermediate (Stage 2) index increased by 1.7% with an increase of 1.9% for the preliminary (Stage 1) index. Through the year to June quarter 2007, the final (Stage 3) index increased by 2.3%, the intermediate (Stage 2) increased by 3.4% and the preliminary (Stage 1) index increased by 3.3%.
The increase in the final (Stage 3) index reflects an increase of 1.5% in the price of domestically produced items, offset by a fall of 1.6% in the price of imported items.
The domestic component increased due to price rises for building construction and petroleum refining.
The imports component decreased due to price falls for electronic equipment, other manufacturing and tobacco products. These decreases were partly offset by an increase in petroleum refining.
The increase of 1.7% in the intermediate (Stage 2) index reflects an increase of 1.6% in the price of domestically produced items and an increase of 2.0% in the price of imported items.
The domestic component increased due to price rises for petroleum refining, basic non-ferrous metals and metal ore mining. The imports component increased due to price increases for oil and gas extraction, petroleum refining and basic chemical manufacturing.
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These increases were partly offset by price decreases for industrial machinery, electrical equipment and electronic equipment.
The increase of 1.9% in the preliminary (Stage 1) index reflects an increase of 1.6% in the price of domestically produced items and an increase of 4.1% in the price of imported items.
The domestic component increased due to price rises for petroleum refining, basic non-ferrous metals and oil and gas extraction. The imports component increased due to price rises for oil and gas extraction, petroleum refining and basic chemical manufacturing.
These increases were partly offset by price falls for industrial machinery and iron and steel manufacturing.
Manufacturing Sector:
During the June quarter 2007, the prices paid by manufacturers for material inputs increased by 2.7%, while the prices they received for their outputs also increased by 2.5%.
The input price index increased by 0.5% through the year to June quarter 2007 and the output price index for the same period increased by 1.5%.
Price rises in imported and domestic crude oil, whole milk, copper, lead ores and concentrates, barley unmilled and sheep and lambs were recorded for the materials used in manufacturing industries.
Price decreases for cattle and calves, flat rolled products of iron and steel, pigs, iron ore mining and imported tobacco provided offsets to the price increases.
Higher prices received for refined petroleum products, non-ferrous basic metal products and non-ferrous metal rolling, drawing, extruding n.e.c., were significant contributors to the increase in the articles produced by manufacturing industries index for the June quarter 2007.
These increases were partly offset by decreases in the prices received for alumina production and aluminium smelting combined with a decrease in meat processing.
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Construction, building sector:
