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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, Commodities

It’s all about inflation this week.

The June quarter CPI figures will be released this Wednesday and, along with the continuing update on developments around Malaysian flight MH17, the CPI will be the focus for our market this week.

In the March quarter, the CPI lifted by 0.6% to stand at 2.9% over the year. Excluding volatile items, the key “underlying” CPI rose by 0.6% to be up 2.7% annually and remained within the Reserve Bank’s 2% to 3% target band. In fact, since then, the Reserve Bank continues to emphasise its view that inflation is not an “issue” and will stay between 2% and 3% per cent over the next few years.

For the June quarter, economists are expecting a 0.6% rise in the “headline” CPI measure, with the annual rate of inflation edging up slightly from 2.9% to 3.1%. The carbon tax would be one factor contributing to a slightly higher annual inflation rate. For the “underlying” measures of inflation, a 0.7% rise is expected in the quarter to be up 2.8% annually.

There was a seasonal increase in health fund costs in the June quarter, but this may be offset by a fall in the cost of domestic travel and accommodation after the peak summer season. Clothing prices may also have fallen in response to warm autumn weather. Car prices also remain the most affordable since the 1970’s, courtesy of a stronger dollar and competition.

Source: Rural Bank


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