As summarised earlier by Houses and Holes, the Australian Bureau of Statistics (ABS) this morning released the Consumer Price Index (CPI) data for the December quarter 0f 2012, which registered a reduction in inflationary pressures across the Australian economy, coming in well below consensus:
According to the ABS, headline CPI rose by just 0.2% in the December quarter, which follows the September’s 1.4% rise on the back of large increases in electricity and utilities prices following the introduction of the carbon tax. You can also see from the below chart that inflationary pressures have receded following the steady build-up over the three quarters to September 2012:
On an annual basis, headline CPI has risen to 2.2% from 2.0% in the September quarter, which is still within the Reserve Bank of Australia’s (RBA) target of 2% to 3% growth over the medium term. Obviously, annual inflation was also affected by the one-off boost from the introduction of the carbon tax:
Looking at the core components, large price rises in the December quarter were recorded in communications and financial and insurance services. By contrast, significant falls were recorded in health and Furnishings, household equipment and services:
Finally, the ABS includes an ‘analytical series’, which provides alternative measures of underlying inflation in the economy. These measures – namely the trimmed mean and weighted median – aim not to measure the size of inflation (which is captured by the headline figure), but the breadth of price inflation across the basket of consumer goods and services.
The purpose of these measures is to exclude unusually large price movements (in both directions) of just a few of the subgroups, which may have quite an impact on the headline CPI. By excluding these outliers, you can get a feel for how widespread across the consumer basket inflation really is (see here for further details).
According to the ABS, the trimmed mean and weighted median measures rose by less than the headline figure, growing by only 0.6%/0.5% (trimmed mean / weighted median) in the December quarter and by 2.3%/2.3% (trimmed mean / weighted median) over the year – around the middle of the RBA’s inflation target (see below charts).
In summary, there appears to be a lack of inflationary pressures across the Australian economy, with the headline, trimmed mean and weighted median CPI measures all tracking well within the RBA’s target band.