Disinflation Progress Stalls, Prolonged RBA Hold Likely

April CPI inflation came in higher-than-expected at 3.6% y/y after 3.5% in March, second straight monthly rise. This is particularly noteworthy given that many services components were not updated given it is the first month of the quarter. The underlying trimmed mean picked up to 4.1% from 4.0%. Inflation remains sticky and heading towards the RBA’s upwardly revised 3.8% forecast for Q2 keeping it on hold.

• Seasonally-adjusted headline CPI rose 0.2% m/m after 0.5% in March. CPI ex volatile items and holiday travel also rose 0.2% m/m to be steady at 4.1% y/y, still well above headline inflation and signalling that the April pick up was not just driven by volatile food and fuel.

Source: MNI - Market News/ABS

• Domestically–driven services prices picked up to 4% y/y from 3.9% while non-tradeables eased to 5% y/y from 5.2%, but still elevated and above the Q1 average.
• Goods inflation was steady at 3.3% y/y while tradeables rose 1.1% y/y up from 0.5%. The RBA has said that the best of the disinflationary impact from goods prices is behind us and this data is consistent with that.

Source: MNI - Market News/ABS

• Housing, food & beverages, transport and alcohol & tobacco continued to be the main contributors to annual headline inflation. Rents rose 7.5% y/y. Food was impacted by bad weather.
• Electricity prices rose 4.2% y/y in April but the ABS calculates that without government rebates they would have been 13.9% y/y. The budget included further relief which is expected to temporarily reduce inflation over FY25.
• Automotive fuel rose 7.4% y/y after 8.1% in March. They rose 2.2% m/m, the third straight monthly increase.