From Westpac this time:
• Westpac’s forecast for the headline CPI is 0.9%qtr which lifts the annual pace to 1.5%yr from 1.0%yr.
• September is traditionally a stronger quarter (mostly due to the annual price resetting for administrated prices) with the ABS seasonal factor worth 0.3ppts. This results in the seasonally adjusted CPI rising a smaller 0.6%qtr.
• Key to the solid rise is the strong price gains for food, housing (mostly via utilities) and recreation. Helping to hold the gains down in the quarter were falling prices for auto fuel, communication and clothing & footwear.
• Overall, traded prices are forecast to rise 0.9%, despite the 3.4% fall in auto fuel prices, which boosts the annual pace from 0.0%yr to 0.6%yr. Excluding fruit, vegetables, fuel and tobacco, traded goods prices are forecast to rise 0.3%/0.6%yr in Q3 highlighting just how modest imported inflationary pressures are.
• Housing costs remain key to core and non-traded inflation. September quarter saw a significant jump in electricity bills lifting utility costs 5.7%qtr. In 2015Q3 utility prices fell 0.5%. Other housing costs remain benign with rents falling in Perth, Darwin and Canberra while dwelling purchase prices have moderated in Sydney, Melbourne & Brisbane while the declines are gathering pace in Perth.
• Core inflation (average) is forecast to print 0.4%qtr (0.39% at two decimal places) which will see annual core inflation lift to 1.6%yr from 1.5%yr. The trimmed mean is forecast to rise 0.38% while the weighted median forecast is 0.40%. The six month annualised pace of the average of the core measures is forecast to lift to 1.7%yr from 1.3%yr in Q2 which remains a modest inflationary pulse.
• The pass through from the early weakness in the AUD did not provide the normal boost you would expect and so we doubt the recent appreciation of the currency will act as a further brake on prices. Outside of housing, where we are forecasting a modest gain following a statistical bounce in Q2, the risks to our forecast are balanced.
