Australia: Expect Q1 headline inflation to increase by +0.7%/qtr and 2.4%/yr - TDS

The analysis team at TDS explain that Australian monthly inflation surged between November and February, and so they expect an upbeat Mar qtr CPI report later this month wherein they expect Q1 headline inflation to increase by +0.7%/qtr and 2.4%/yr.

Key Quotes

“We look for the Q1 trimmed mean to increase by +0.6%/qtr, picking up from 1.64%/yr to 1.95%/yr, and combined with a +0.5%/qtr lift in the weighted median measure (or 1.83%/yr) we see overall annual underlying inflation creeping up from 1.55%/yr to 1.89%/yr.”

“While there isn’t a “perfect” relationship between monthly and the more comprehensive quarterly inflation (1) a pickup in underlying inflation appears inevitable; and (2) monthly domestic inflation is accelerating, and we expect that to be reflected in the official Q1 inflation report.”

“We expect Q1 headline inflation to increase by +0.7%/qtr and 2.4%/yr. The floods associated with Cyclone Debbie will boost some fresh fruit and vegetable prices by up to 300- 400% if history is repeated. Q2 2006 headline CPI was +1.7%/qtr and Q1 2011 CPI rose by +1.4%/qtr. While we expect a similar impact for Q2 CPI, these outsized price increases will be trimmed out of the underlying measures.”

“On our projections, we don’t expect Q1 CPI having a material impact on current RBA thinking or market pricing.”