Australia: Q1 CPI printed 0.4% - Westpac

Justin Smirk, Research Analyst at Westpac, notes that the March Quarter CPI of Australia printed 0.4%qtr compared to Westpac’s forecast for 0.5% and the market median was also 0.5%.

Key Quotes

“Given that at 2 decimal places the CPI rise 0.45%qtr and our forecast was 0.48%qtr it was a close result. The annual rate was flat at 1.9%yr compared to 1.9% in Q4 2017, 1.8%yr in Q3, 1.9%yr in Q2 and 2.1%yr in Q1.”

“The average of the core measures, which are seasonally adjusted and exclude extreme moves, rose 0.5%qtr meeting expectations. In the quarter, the trimmed mean gained 0.53% while the weighted median lifted 0.52%. The annual pace of the average of the core measures printed 2.0%yr, a slight uptick from 1.9%yr in 2017 Q4 and Q3 and 1.8%yr in Q2.”

“Incorporating revisions, the six month annualised growth in core inflation has returned to (just) the bottom of the RBA target band printing 2.0%yr. This is the first time core inflation has returned to the base of the target band since the 2.0%yr print in December 2015.”

“So far in 2018 we struggle to find any broad inflationary pressure in the Australian economy. Core inflation is just at the bottom of the RBA’s target band (held there by non-traded prices and in particular housing, health and education) and we can find little to suggest a risk of a dangerous acceleration. But nor can we find signs that the disinflationary pulse is widening suggesting we could see a significant dip in the rate of core inflation.”

“Our preliminary estimate for the 2018 Q2 CPI is 0.4%qtr which will lift the annual pace to 2.2%yr. During 2018 we expect inflation to peak at 2.4%yr before easing back to 2.1%yr by year end. Our core inflation estimate remains around 2.0%yr to 2.1%yr through 2018. But we note we see downside risks to this forecast.”