Producer prices clear way for rate cut (updated)

ABS Producer Prices for the September quarter have come in weak:

SEPTEMBER KEY POINTS

FINAL (STAGE 3) COMMODITIES

  • rose 0.6% in the September quarter 2011.
  • mainly due to rises in the prices received for electricity, gas and water (+8.2%), commercial fishing (+14.1%) and other agriculture (+3.7%).
  • partly offset by falls in the prices received for building construction (-0.3%) and motor vehicle and part manufacturing (-1.3%).
  • rose 2.7% through the year to the September quarter 2011.

INTERMEDIATE (STAGE 2) COMMODITIES

  • rose 0.1% in the September quarter 2011.
  • mainly due to rises in the prices received for electricity, gas and water (+2.8%), marketing and management services (+2.8%), and legal and accounting services (+2.6%).
  • partly offset by falls in the prices received for grain, sheep, beef and dairy cattle farming (-5.8%) rose 4.5% through the year to the September quarter 2011.

PRELIMINARY (STAGE 1) COMMODITIES

  • rose 0.1% in the September quarter 2011.
  • mainly due to rises in the prices received for electricity, gas and water (+3.4%), coal mining (+4.1%) and marketing and management services (+2.8%).
  • partly offset by falls in the prices received for oil and gas extraction (-4.2%).
  • rose 5.6% through the year to the September quarter 2011.

 Here’s a chart:

Given the weak state of manufacturing, it’s no surprise to find no pricing power across the three categories. The CPI is much more important but there is nothing here to inhibit a rate cut if the RBA so desires on Cup day.

Update

Here as well is a YOY chart from Rumplestatskin showing the relatuionship with the CPI. It appears the PPI does lead CPI prices somewhat consistently (though, there’s a nasty break in the 2003-2005 period:

Comments

  1. Why then, is the MSM running headlines like:

    “Don’t punt on a Melbourne Cup rate cut”

    and another article that seems to totally contradict simple economics:

    “Interest rates may be on-hold for longer than previously expected, after official data showed a measure of inflation had eased in the September quarter.”.

  2. go the rate cut! better close those shorts out before its too late. i reckon you have a a couple of days at most before 4300 is taken out on the upside.

      • HSBC PMI for China went up somehow. From 49.9 to 51.1. The world economy is surprising I must say. In the midst of such massive panic, we’ve had extremely good indicators flooding the headlines.

        Of course, this data may discourage the Chinese from easing credit conditions which won’t help their debt issues.

        I do sometimes think that everything will be OK (in the short term). ASX at 5000, AUD 1.10 or higher. Stalling the Euro negotiations is increasing optimism and if China, India, Brazil and others start to put money into the EFSF the world can look forward to decades of grinding through debt and austerity.

  3. Operations normal. No one really knows what the true story is and even McCrann has turned to the rate cut corner! I still say jack ’em up. Interesting times.