Westpac has the details.
In finer detail the index rose 0.8% in April compared to our 0.5% forecast; we assume the market median would have been around 0.4% given the 6.4%yr forecast.
We had observed a moderation in the average monthly increase from 0.9%mth through the last three months of 2022 to 0.1%mth through the first three months of 2023. April has started Q2 with a stronger 0.8%mth increase.
The annual pace of 6.8%yr is up from the 6.3%yr in March but is well off the December peak of 8.4%yr. The ABS notes that the largest contribution to annual inflation was auto fuel.
““It’s important to note that a significant contributor to the increase in the annual movement in April was automotive fuel. The halving of the fuel excise tax in April 2022, which was fully unwound in October 2022, is impacting the annual movement for April 2023.”
But we have good data on weekly petrol prices so this has been well flagged and was incorporated into our forecast.
So where were the surprises? You can point to stronger than expected rents (lifting 0.8% in April, an upward gain from the softer than expect 0.5% increase in March and above the 0.7% increase seen in January and February) and dwelling prices (0.5% in April following a 0.2% increase in both February and March).
However, total housing costs were up just 0.3% in the month due to a 0.9% fall in electricity prices.
This followed on from a 0.1% fall in March which was due to state power bill rebates. It appears that this was a significant factor again in April. Without these rebates, housing costs would have been a significant factor lifting the total CPI even further.
In the month the 0.9% fall in electricity prices was worth around -0.02ppt of the Monthly Indicator.
For us the most significant surprise was the 7.2% rise in holiday travel & accommodation (6.1% for domestic travel and 8.6% for international travel).
This increase was worth about 0.17ppt on the Monthly Indicator explaining a large part of the upside surprise compared to our forecast.
It is pretty depressing to consider that energy detracted from inflation in April. That is not going to last.
Is there an Easter effect in that travel number? It is not a busy period otherwise so the price pop makes no sense. Looks like a head fake to me. Without the travel pop, inflation keeps falling at a good clip.
But after last month’s meeting and the RBA’s persistent wages delusion, the headline number gives the central bank an excuse to hike.
I’ll go with the flow and say that it will next week.
