MNI DATA PREVIEW: Australia Q4 CPI Seen Up Due To Fuel, Veges

Repeats Story Initially Transmitted at 06:10 GMT Jan 30/01:10 EST Jan 30

By Sophia Rodrigues

     SYDNEY (MNI) - Australia's consumer price index is expected to have

accelerated in the fourth quarter, touching the bottom of the Reserve Bank's

target band for the first time in three quarters. However, the sustainability of

inflation pressure remains in doubt as the rise is likely to be largely

accounted for by rises in fuel and vegetable prices.

     Economists expect Q4 headline CPI to rise 0.7% q/q, taking y/y CPI to

+2.0%. This compares with Q3 headline CPI of +0.6% q/q and +1.8% y/y. If the

outcome matches expectation, it would be only the second time in 13 quarters

where headline CPI touches at least bottom end of the RBA's target band, just

slightly below the +2.1% recorded in Q1 of 2017.

     The median forecast for underlying inflation, which is roughly the average

of the trimmed mean and weighted median measures of inflation, is for a rise of

0.45% q/q and +1.9% y/y. An outcome matching expectation would mean underlying

inflation has remained below the bottom end of RBA's target band for the ninth

quarter in a row.

     The main source of the boost to headline CPI is expected to come from

around an 8% increase in petrol prices and a 9% rise in vegetable prices. 

     Westpac's senior economist Justin Smirk has a higher-than-median forecast

of +0.8% q/q and +2.1% y/y but he sees the increase mainly coming from a 9.1%

rise in fuel prices, 7.5% increase in tobacco prices and a 2.8% increase in

holiday travel.

     Interestingly, Smirk's forecast incorporates a 1.2% q/q fall in fruit and

vegetable prices, with a 5% fall in fruit prices expected to offset a 2% rise in

vegetable prices. 

     JP Morgan economists have the highest forecast for headline CPI among the

16 in MNI's poll, at +1.0% q/q. They attribute this to a rise in fuel and

vegetable prices. Their economists also have the highest forecast for underlying

CPI of +0.6% q/q largely because they don't expect all the strength in food,

fuel and tobacco to be trimmed out.

     Nomura strategist Andrew Ticehurst is forecasting a below consensus 0.3%

q/q in underlying CPI, saying headline could move higher because of items like

petrol but underlying pressures still look narrowly-based.

     The Australian Bureau of Statistics (ABS) will release the data at 11:30

local time Wednesday (0030 GMT).

     Below are individual forecasts for fourth quarter CPI data. 

                     All        All

                  Groups     Groups    Trimmed       Underlying       Underlying

                     CPI        CPI       Mean       Inflation*       Inflation*

--------------------------------------------------------------------------------

                     Q/Q        Y/Y        Q/Q              Q/Q              Y/Y

                % Change   % Change   % Change         % Change         % Change

                      Q4         Q4         Q4               Q4               Q4

Median              +0.7       +2.0      +0.45            +0.45             +1.9

High                +1.0        N/A       +0.6             +0.6             +2.0

Low                 +0.7       +1.9       +0.3             +0.3            +1.75

Mean                +0.7       +2.0      +0.45            +0.45             +1.9

No of

Respondents           16         16          9               15               16

Previous

Report              +0.6       +1.8       +0.4            +0.35            +1.85

NAB                +0.75       +2.0      +0.45            +0.44            +1.85

Westpac             +0.8       +2.1      +0.52            +0.54             +2.0

ANZ                 +0.7       +2.0       +0.4             +0.4             +1.8

CBA                 +0.7       +2.0       +0.6             +0.5             +1.9

UBS                 +0.7       +1.9       +0.4             +0.4             +1.8

Deutsche Bank       +0.8       +2.1        N/A             +0.4             +1.9

TD Securities        N/A       +2.1        N/A            +0.57            +1.99

RBC Capital         +0.8       +2.1        N/A             +0.4             +1.8

BA-ML               +0.8       +2.1        N/A             +0.5             +1.9

St George           +0.7       +2.0        N/A             +0.4             +1.8

HSBC                +0.7       +2.0       +0.5            +0.55             +2.0

Moody's             +0.7       +1.9        N/A              N/A              N/A

StanChart           +0.7       +1.9        N/A             +0.4             +1.8

JP Morgan           +1.0        N/A       +0.6             +0.6             +2.0

Nomura              +0.7       +2.0       +0.3             +0.3            +1.75

AMP Capital         +0.7       +2.0        N/A             +0.5             +1.9

Macquarie           +0.7       +2.0       +0.4             +0.4            +1.85

     * Y/Y Underlying inflation is assumed as the average of trimmed mean and

weighted median measures of inflation.

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

[TOPICS: MTABLE]