Trimmed mean consumer inflationary expectations lifted again in Jan to 2.3%yr from 2.1%yr in Dec and 1.9%yr in Nov. Expectations have lifted from the equal record low print of 1.5%yr in Sep 2013.
The trend is drifting higher; 2.1%yr in Jan from 2.0%yr in Dec (originally 1.9%yr) and is edging back towards the recent peak of 2.4%yr in May 2013.
The median expectations for managers & professionals also lifted to 2.6%yr in Jan from 2.3%yr in Dec and 2.0%yr in Nov to be almost back at the Aug 2013 print of 2.7%yr. Expectation for managers are higher than the median for all households which is 2.1%yr. The trend for managers & professional has turned up again, to 2.3%yr in Jan from 2.2%yr in Dec, Nov and Oct.
Overall, we are starting to see a drift higher in inflationary expectations which is consistent with the higher than expected 2013Q4 CPI print. The important question is where to next?
The net balance of those expecting price rises, to those expecting price falls, provides a guide to the changes in the spread or depth of inflationary expectations among households. The net balance continues to rise in to 72.1% in Jan from 67.1% in Dec, 65.5% in Nov. The monthly print is narrowing in on the long-run average of 75.3%.
In trend terms, the net balance is drifting higher, up from a low of 64.0% in Sep to 68.9% in Jan.
We are closely watching this series as a widening net balance points to broader price pressures. The fact in is nearing the long-run average is consistent with the recent uptick in inflation – please not this survey was completed before the releases of the 2013Q4 CPI.
Inflationary expectations have picked up but remain modest. This is consistent with the pickup in reported CPI inflation. Nevertheless, expectations remains contained with the RBA’s target band and are currently far from a high risk scenario for the inflation outlook.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
