Australia: Headline CPI likely to surge 0.6% in June quarter - Westpac

Westpac’s forecast for the headline CPI is 0.6%qtr lifting the annual pace to 2.4%yr from 2.3%yr, according to Justin Smirk, Senior Economist at Westpac.

Key Quotes

“June is seasonally a softer quarter with the ABS seasonal factors boosting our seasonally adjusted estimate to 0.8%qtr.”

“Key factors in Q2 are rising fruit, housing and health costs being partially offset by falling auto fuel.”

“Core inflation is forecast to print 0.5%qtr (0.54% at two decimal places) holding the annual rate flat at 1.8%yr. The trimmed mean is forecast to rise 0.51% while the weighted median forecast is 0.57%. The two quarter annualised pace of core inflation will lift slightly to 1.9%yr from 1.8%yr still holding below the bottom of the RBA’s target band; the two quarter pace has been below the band since June 2015.”

“Traded prices are forecast to rise 0.9%qtr/–1.2%yr and the surge in fruit prices post cyclone Debbie flow through. Clothing & footwear are expected to have a modest seasonal bounce while holiday travel faces seasonal discounting and audio visual & computing continue their deflationary trend.”

“Non-traded prices are forecast to rise 0.5% in Q2 due to the seasonal boost from medical & dental services & sound gains in housing costs via rising dwelling purchases prices.”

“There is a lot of interest in the impact of rising electricity prices in the September quarter CPI. For some guidance we have a preliminary estimate for the Q3 CPI. Incorporating a 16%qtr rise in electricity prices we are forecasting a 0.7%qtr rise in headline inflation but a modest 0.3%qtr rise in core inflation.”