Australia CPI preview

Via Westpac:

Westpac is forecasting a 0.5% rise in the June quarter CPI lifting the annual pace to 1.5%yr from 1.3%yr.

The June quarter tends to be a seasonally soft quarter with the ABS projecting a seasonal factor of +0.2ppt. The seasonally adjusted CPI is forecast to rise 0.7%. The trimmed mean is forecast to rise 0.33%qtr/1.5%yr and the weighted median is forecast to rise 0.30%qtr/1.1%yr. The average of the core inflation measures is forecast to print 0.31%qtr with the annual pace easing back to 1.3%yr from 1.4%yr.

In June, we forecast that fresh fruit & vegetable prices drag food prices down 0.4%qtr. Housing costs are down slightly due to falling utilities and there is the usual seasonal fall in pharmaceuticals while car prices fall again.

Auto fuel is forecast to make the single largest contribution rising 11%. Alcohol & tobacco rose modestly while clothing & footwear had a positive quarter. Health costs continue to rise solidly (as rising medical & hospital services more than offset falling pharmaceuticals) and there was an unseasonal gain in domestic holiday travel.

Traded prices are forecast to rise 0.8%qtr while non-traded prices are forecast to rise 0.4%qtr.

Outside of fuel, there is very little inflationary pressure in the Australian economy.

Core inflation remains well below the bottom of the RBA target band as moderating housing costs hold back modest inflationary pressure elsewhere. Competitive deflationary pressure in consumer goods is limiting the pass through of the weaker AUD though it is having an impact. As such, we find it hard to see how core inflation could break higher any time soon.