The Australian Bureau of Statistics (ABS) has just released Producer Price Index (PPI) data for the December quarter, which has registered only a 0.3% quarterly increase in final (stage 3) prices – below consensus forecasts of a 0.4% rise – and an increase of 2.9% over the year:
The 0.3% in final (stage 3) prices was driven primarily by rises in the prices received for industrial machinery and equipment manufacturing (+3.2%), other manufacturing (+3.1%) and motor vehicle and part manufacturing (+1.4%), partly offset by partly offset by falls in the prices received for other agriculture (–21.8%) and flour mill and cereal food manufacturing (–6.1%).
The below chart shows the quarterly change in final PPI by component since 2005:
And below is a time-series of final PPI dating back to the beginning of the series. Note the huge fall in imported costs reflecting the steady appreciation of the Australian dollar:
Other things equal, this benign result should strengthen the likelihood that the Reserve Bank will reduce official interest rates at its next meeting.