MNI DATA ANALYSIS: Q3 CPI Benign, Ex-Housing Up 0.2% Q/Q

By Sophia Rodrigues

     SYDNEY (MNI) - Australia's consumer price index accelerated in the third

quarter but the year-on-year rise slowed and remained below the Reserve Bank of

Australia's target band for the second straight quarter.

     The underlying CPI accelerated slightly on a y/y basis, but once again

remained below the RBA's target band. The outcome of 1.85% y/y was slightly

higher than 1.8% in Q2. Underlying CPI q/q was very benign at +0.35% q/q.

     The outcome fell short of MNI median forecast and points to the RBA's

monetary policy staying on hold for longer, with some risk to the downside. The

outcome on headline CPI would particularly worry the RBA because it shows there

was hardly any inflationary pressure in the economy if one removes the effect of

the sharp rise in utilities prices.

     Indeed, CPI excluding the housing category, which includes utilities, rose

just 0.2% q/q. On a y/y basis it rose 1.3%, slowing sharply from +1.8% in Q2.

     The Q3 data published by the Australian Bureau of Statistics Wednesday

showed headline CPI rose 0.6% q/q -- below a MNI median forecast 0.8% q/q gain

-- taking y/y CPI to +1.8%, below the MNI median of +2.0%. 

     The rise was mainly driven by a 6.8% q/q rise in utilities prices, with

water rising 3.2%, electricity up 8.9% and gas prices rising 5.2%. These

increases drove the housing group up 1.9% q/q and 3.3% y/y. 

     Tobacco made another significant contribution with a 4.1% q/q rise and

international holiday travel and accommodation rose 4.1%.

     The main drag came from a 0.9% q/q fall in food prices, as vegetable prices

plunged 10.9% due to sharp rise in supplies. Automotive fuel prices fell 2.3%

and telecommunication equipment and services dropped 1.5%.

     The Q3 CPI is usually driven higher by seasonal factors and on a seasonally

adjusted basis, CPI rose just 0.4% q/q though y/y CPI was the unchanged at 1.8%.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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