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‘Big 4’ Views On CPI

AUSTRALIA

The ‘Big 4’ weigh in on the impending Q222 Australian CPI release (due 11:30 Sydney/02:30 London):

  • ANZ: We expect headline inflation to print at 6.6% Y/Y (2.3% Q/Q) and trimmed mean to reach 5.1% Y/Y (1.9% Q/Q). We think the risks are balanced for these forecasts.
  • CBA: We expect inflation rose by 1.9% Q/Q, to take the annual rate to 6.2% Y/Y. We anticipate higher petrol prices, as well as continued rising food, housing, and energy costs to be some of the key drivers of the increase. Price rises have been most acute for non-discretionary items. As households are less able to reduce consumption of these essential goods and services, and with real wages firmly negative, the picture for households is not positive. If the CPI prints broadly in line with our forecast then we expect the RBA to increase the cash rate by 50 basis points at the August Board meeting.
  • NAB: We forecast headline CPI to grow 1.9% Q/Q and 6.3% Y/Y. The closely watched core trimmed mean measure is expected to accelerate to 1.5% Q/Q and 4.7% Y/Y. If realised that would be the highest quarterly core inflation print since 1990 and would have core hitting 5.9% on a six-month annualised basis. We see upside risks to these forecasts. For the RBA, a 50bp rise in August is almost locked in given the unexpectedly sharp fall in the unemployment rate to 3.5%. An upside surprise to inflation which saw trimmed mean at around 1.75% Q/Q with broad-based contributions would argue for a super-sized 75bp hike, and a need for the RBA to go well into restrictive territory.
  • Westpac: We are forecasting a solid 1.7% Q/Q rise in the June quarter CPI. Following on from the 2.1% print in the March quarter this will lift the annual pace from 5.1% Y/Y to 6.1%. We have also raised the peak in annual inflation to 7.2% Y/Y from 6.6% in the December quarter 2022. Core inflation is forecast to lift 1.4% Q/Q in June, matching the lift in March, taking the annual pace to 4.6% Y/Y from 3.7%. We have also revised up the peak in trimmed mean annual inflation from 4.8% Y/Y to 5.0% in both the September and December. This 0.2ppt revision to our preliminary forecast is mostly due to the dwelling prices forecast lifting 0.9ppt to 5.5% due to ongoing construction input cost inflation. Most of the remaining revision was due to a 2.8ppt increase in our food price forecast to 5.4% reflecting ongoing supply disruptions.
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The ‘Big 4’ weigh in on the impending Q222 Australian CPI release (due 11:30 Sydney/02:30 London):

  • ANZ: We expect headline inflation to print at 6.6% Y/Y (2.3% Q/Q) and trimmed mean to reach 5.1% Y/Y (1.9% Q/Q). We think the risks are balanced for these forecasts.
  • CBA: We expect inflation rose by 1.9% Q/Q, to take the annual rate to 6.2% Y/Y. We anticipate higher petrol prices, as well as continued rising food, housing, and energy costs to be some of the key drivers of the increase. Price rises have been most acute for non-discretionary items. As households are less able to reduce consumption of these essential goods and services, and with real wages firmly negative, the picture for households is not positive. If the CPI prints broadly in line with our forecast then we expect the RBA to increase the cash rate by 50 basis points at the August Board meeting.
  • NAB: We forecast headline CPI to grow 1.9% Q/Q and 6.3% Y/Y. The closely watched core trimmed mean measure is expected to accelerate to 1.5% Q/Q and 4.7% Y/Y. If realised that would be the highest quarterly core inflation print since 1990 and would have core hitting 5.9% on a six-month annualised basis. We see upside risks to these forecasts. For the RBA, a 50bp rise in August is almost locked in given the unexpectedly sharp fall in the unemployment rate to 3.5%. An upside surprise to inflation which saw trimmed mean at around 1.75% Q/Q with broad-based contributions would argue for a super-sized 75bp hike, and a need for the RBA to go well into restrictive territory.
  • Westpac: We are forecasting a solid 1.7% Q/Q rise in the June quarter CPI. Following on from the 2.1% print in the March quarter this will lift the annual pace from 5.1% Y/Y to 6.1%. We have also raised the peak in annual inflation to 7.2% Y/Y from 6.6% in the December quarter 2022. Core inflation is forecast to lift 1.4% Q/Q in June, matching the lift in March, taking the annual pace to 4.6% Y/Y from 3.7%. We have also revised up the peak in trimmed mean annual inflation from 4.8% Y/Y to 5.0% in both the September and December. This 0.2ppt revision to our preliminary forecast is mostly due to the dwelling prices forecast lifting 0.9ppt to 5.5% due to ongoing construction input cost inflation. Most of the remaining revision was due to a 2.8ppt increase in our food price forecast to 5.4% reflecting ongoing supply disruptions.