Australia CPI not good under the hood

The Consumer Price Index (CPI) rose 1.3 per cent through the year to September quarter 2016, according to the latest Australian Bureau of Statistics (ABS) figures.

The CPI rose 0.7 per cent in the September quarter 2016. This follows a rise of 0.4 per cent in the June quarter 2016.

The most significant price rises this quarter are fruit (+19.5 per cent), vegetables (+5.9 per cent), electricity (+5.4 per cent) and tobacco (+2.3 per cent). These rises are partially offset by falls in communication (-2.3 per cent) and fuel (-2.9 per cent).

The ABS said the jump in fruit and vegetable prices was due to temporary factors such as adverse weather conditions, including floods, in major growing areas, impacting supply chains.

SEPTEMBER KEY POINTS

THE ALL GROUPS CPI
rose 0.7% this quarter, compared with a rise of 0.4% in the June quarter 2016.
rose 1.3% over the twelve months to the September quarter 2016, compared with a rise of 1.0% over the twelve months to the June quarter 2016.

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OVERVIEW OF CPI MOVEMENTS
The most significant price rises this quarter are fruit (+19.5%), electricity (+5.4%), vegetables (+5.9%), tobacco (+2.3%) and property rates and charges (+4.0%).
The most significant offsetting price falls this quarter are automotive fuel (-2.9%) and telecommunication equipment and services (-2.5%).

JP Morgan:
“We think the overshoot on consensus was due to fruit prices. They were very strong.
The core numbers were pretty close to expectations.
In terms of what this means for the RBA we think they are going to remain on hold next week and the rest of this year.
But we still think inflation, particularly core inflation, is quite low and that means you’re likely to see further rate cuts in the first half of 2017.
Everyone had forecast for annual inflation to move higher. And that’s been the case so you can probably say that we’ve seen the low point. But that said, inflation still remains very low particularly the core measure.”
(JPM comments via Reuters)

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ABS data in details below:

Jun Qtr 2016 to Sep Qtr 2016
Sep Qtr 2015 to Sep Qtr 2016
Weighted average of eight capital cities
% change
% change

All groups CPI
0.7
1.3
Food and non-alcoholic beverages
1.7
1.5
Alcohol and tobacco
1.1
5.7
Clothing and footwear
0.3
1.2
Housing
1.0
1.8
Furnishings, household equipment and services
1.1
1.9
Health
-0.2
3.9
Transport
-0.5
-3.4
Communication
-2.3
-7.5
Recreation and culture
0.6
0.6
Education
0.2
3.3
Insurance and financial services
0.9
2.9
CPI analytical series
All groups CPI, seasonally adjusted
0.4
1.4
Trimmed mean
0.4
1.7
Weighted median
0.3
1.3