Inflation still weak as prices rise 0.6 percent in December quarter

Inflation still weak as prices rise 0.6 percent in December quarter
Inflation still weak as prices rise 0.6 percent in December quarter

The Consumer Price Index (CPI) rose 0.6 per cent in the December quarter 2017, the latest Australian Bureau of Statistics (ABS) figures reveal.

It was below expectation, with some economists suggesting there was still scope for another rate cut.

Certainly no early RBA hike here! was Shane Oliver's immediate tweet.

The latest figure follows a rise of 0.6 per cent in the September quarter 2017.

The Australian dollar dipped on the latest data.

The most significant price rises this quarter are automotive fuel (+10.4%), tobacco (+8.5%), domestic holiday travel and accommodation (+6.3%) and fruit (+9.3%).

These price rises were partially offset by falls in international holiday travel and accommodation (-1.7%), audio visual and computing equipment (-3.5%) and telecommunication equipment and services (-1.4%).

The CPI rose 1.9 per cent through the year to December quarter 2017 having increased 1.8 per cent through the year to September quarter 2017.

What the economist say

Chief Economist for the ABS, Bruce Hockman, said while the annual CPI rose 1.9 per cent, annual inflation in most East Coast cities rose above 2 per cent, due in part to the strength in prices related to housing.

"Softer economic conditions in Darwin and Perth have resulted in annual inflation remaining subdued at 1.0 and 0.8 per cent respectively."

AMP Capital's Shane Oliver shared the below chart on his Twitter.

Click here to enlarge.

Inflation still weak as prices rise 0.6 percent in December quarter

Economist Stephen Koukoulas says the inflation data continue's to scream "rate cut."

"Another qtr below target. Underlying looks like it's decelerating RBA says "sorry folks" to the 730,000 people unemployed, 1.1 million underemployed & the 12 million lucky to get a 2% pay rise," Koukoulas tweeted.

IFM chief economist Alex Joiner disagreed.

"AU  CPI data slightly weaker than expected on headline and 'core' measures, unlikely to shift the RBA's assessment of the inflation/wages environment materially at next week's board meeting."

Veteran ABC business journalist Peter Ryan says the RBA may be concerned at softer trimmed mean of 0.4 percent and 1.8 percent, with CPI inflation "a little weaker than expected."

CommSec's Ryan Felsman noted inflation is still under control.

"Inflationary pressures remain subdued so the Reserve Bank will remain on the sidelines for some time yet.

"But there was a modest lift in the rate of annual headline inflation, finishing a touch below the Reserve Bank’s forecast of 2.0 per cent for 2017. Petrol, tobacco, fruit and domestic travel and accommodation prices all rose over the quarter.

"Though this was partially offset by the continued decline in computing and telecommunications-related goods and services prices. 

"Underlying inflation - which excludes the more volatile energy and food components – also remained below the Reserve Bank’s target band of 2-3 per cent.

"But the 2017 annual print was a touch above the Board’s 1.75 per cent forecast.

"And underlying inflation looks well placed to be a touch above the Reserve Bank forecast for 2018 of 1.75 per cent.

"Still, not enough to prompt any action on interest rates," he said.

Pete Wargent shared a chart on underlying inflation which sits at 1.9 percent.

Click here to enlarge.

Inflation still weak as prices rise 0.6 percent in December quarter

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Westpac had suggested there was a downside risk to the December quarter CPI.

Joel Robinson

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

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