Knee-Jerk Move Lower On Data Reversed

Slightly firmer than expected monthly CPI data (+7.3 Y/Y headline and +5.6% trimmed mean vs. BBG survey expectations of +7.2% & +5.5%, respectively), coupled with a firmer than expected retail sales print (+1.4% M/M vs. BBG median +0.6%, alongside a revision to the prior month with the surprise -0.2% print adjusted to +0.4%), applied some brief pressure to the ACGB space, which pared back from extremes relatively quickly.

• The move away from post-data cheaps may have been a product of one data vendor posting an erroneous headline CPI print of +7.4% Y/Y. Wider cash ACGBs run ~4bp cheaper across the curve, while YM & XM are -4.0, a touch above early Sydney levels, aided by U.S. Tsys trading marginally firmer on the day.
• The ABS noted that the CPI data is indicating ongoing inflationary pressures, while “the most significant contributors to the annual rise in November were Housing (+9.6%), Food and non-alcoholic beverages (+9.4%), Transport (+9.0%), Furniture, household equipment and services (+8.4%) and Recreation and culture (+5.8%).”
• When it came to the retails sales data the ABS noted that “the rise in turnover was driven by Black Friday sales, which boosted spending on clothing, footwear, furniture, and electronic goods… Given the increasing popularity of Black Friday sales, the smaller increase in October may reflect consumers waiting to take advantage of discounting in November, particularly in light of cost-of-living pressures.”
• The net message from this is that inflation/cost-of-living pressures remain acute in Australia, a matter the RBA is well aware of.