Producer inflation roars to GFC high

By Unconventional Economist in Australian Economy, Australian interest rates

at 12:05 pm on July 29, 2022 | 0 comments

The Australian Bureau of Statistics (ABS) today released Producer Price Index (PPI) data for the June quarter, which registered a 1.4% quarterly increase in final prices to be 5.6% higher over the year:

It was the strongest lift in the PPI since December 2008.

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The key growth drivers were:

Output of building construction (+3.9%), driven by continuing supply constraints for timber and metals, high freight costs and labour shortages.
Petroleum refining and petroleum fuel manufacturing (+31.5%) due to a decrease in global crude oil supplies and increased demand in response to easing COVID19 restrictions.
Heavy and civil engineering construction (+2.8%), due to increases in diesel and material prices coupled with skilled trade shortages and high freight costs.

The below chart compares annual changes in the final PPI against the Consumer Price Index (CPI):

Both are obviously tracking at generational highs.

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Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also Chief Economist and co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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