It is funny how one number can change peoples perceptions. Last week we saw the CPI and the fact that pretty much no-one expected it means that analysts and journos want to talk about and give it more credence than if it had of been inside their range. I believe it’s a form of mental arithmetic. These pundits focus on it because they didn’t see it coming and having failed to predict it they elevate one number to a higher plain than otherwise would have been the case.
What prompted the above comment was the release a few minutes ago of the TD Securities – Melbourne Institute Experimental Inflation gauge which the reporter waxed lyrical about Australia’s inflation problem. Now clearly this fits the narrative since the CPI but is it right?
Mmmm, not exactly, look at the following charts from my Bloomberg Terminal.
The month on month data is volatile, as you can see, but this month the outturn was 0.3% against last month’s 0.6%
Similarly the year on year number has fallen from 3.8% last month to 3.6% this month. Clearly not weak inlfation but neither rampant and, importantly for the RBA, it is holding below 4%. So it’s not 2008 – at least not yet.
