Consensus Trimmed Mean CPI Forecast Above RBA’s May Projection

Q2/June CPI print on July 31 and will be a focus after May’s headline rose to 4.0% and trimmed mean to 4.4%. If the data print in line with RBA May expectations of 3.8% for headline and trimmed mean, requiring 1.0% q/q and 0.8% quarterly rises, then rates are likely to be unchanged at the August 6 meeting. Even a print in line with Bloomberg consensus at 1.0% and 1.0% respectively on its own is unlikely to shift the RBA depending on services and the outlook.

• Consensus estimates for headline CPI are between 0.7%-1.1% q/q resulting in annual inflation at 3.5-3.9% with a 3.8% median. NAB and Westpac are in line with consensus, CBA is 0.1pp lower on the annual rate whereas ANZ is above forecasting 1.1% and 3.9%.
• Trimmed mean estimates are 0.8-1.1% q/q and 3.8-4.1% y/y with the median at 1.0% and 4.0%, above the RBA’s May forecast. NAB is in line with consensus, Westpac expects 0.9% and 4.0%, whereas ANZ and CBA are at 0.9% and 3.9%.
• ANZ says that there are upside risks to its core forecast but there are also risks to headline from volatile electricity and holiday prices and tradeables from shipping costs. It notes non-tradeables are seasonally softer in Q2 and expect a 0.8% q/q rise. Westpac also sees significant uncertainty from energy.
• There will be attention on domestically-driven components, especially market services. Given high correlations, NZ Q2 data suggest that Australia should see a moderation in quarterly non-tradeables growth.
• June monthly CPI is projected to moderate to 3.8% from 4.0% with forecasts 3.5%-3.8%. ANZ and NAB are in line with consensus whereas CBA and Westpac are below expecting 3.6% and 3.5% respectively. ANZ estimates that it will rise 0.5% m/m, while Westpac forecasts 0.3% m/m.