The Australian Bureau of Statistics (ABS) has released the Consumer Price Index (CPI) data for the September quarter 0f 2013, which registered a large quarterly jump in prices, with the result also coming in above economists’ expectations:
According to the ABS, headline CPI rose by a strong 1.2% in the September quarter, which follows March’s and June’s 0.4% rise. It was the strongest quarterly rise in inflation since last year’s September quarter spike relating to large increases in electricity and utilities prices following the introduction of the carbon tax:
On an annual basis, however, headline CPI growth slowed to 2.2% from 2.4% in the June quarter, which is at the lower end of the Reserve Bank of Australia’s (RBA) target of 2% to 3% growth over the medium term (see next chart).
Overall, the CPI result was above analyst’s expectations, who had tipped the index to rise by 0.8% over the quarter and by 1.8% over the year.
Looking at the core components, you can see that the spike in inflation was driven by rising housing, transport and recreation costs, although nine of the key categories recorded increases in prices:
Over the year, solid price growth was experienced across health, education, housing, and transport, whereas food and beverage prices fell (see next chart).
The ABS includes an ‘analytical series’, which provides alternative measures of underlying inflation in the economy. These measures – namely the trimmed mean and weighted median – aim not to measure the size of inflation (which is captured by the headline figure), but the breadth of price inflation across the basket of consumer goods and services.
The purpose of these measures is to exclude unusually large price movements (in both directions) of just a few of the subgroups, which may have quite an impact on the headline CPI. By excluding these outliers, you can get a feel for how widespread across the consumer basket inflation really is (see here for further details).
According to the ABS, the trimmed mean and weighted median measures differed from the headline result, rising by 0.7%/0.6% (trimmed mean / weighted median) in the September quarter and by 2.3% respectively over the year – still at the lower end of the RBA’s inflation target (see below charts).
finally, the below charts show CPI broken-out by tradables (mostly imports) and non-tradables (mostly services). As you can see, tradable inflation (circa 40% of the CPI basket) has barely shifted over the past decade or so – held down by the rising Australian dollar – whereas non-tradable inflation has grown strongly:
The recent rally of the Australian dollar should put downward pressure on tradable prices, helping to keep overall inflation in check.
In summary, inflationary pressures across the Australian economy remain under control, despite this quarter’s sharp rise, with the headline, trimmed mean and weighted median CPI measures all tracking well within the RBA’s target band.
