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Monthly CPI Firmer In Y/Y Terms, Core Measure Mixed

AUSTRALIA DATA
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Australia's May monthly CPI was stronger than expected. It printed at 4.0% y/y, versus 3.8% forecast and 3.66% prior. This is the firmest y/y print since Nov last year. Base effects played a role given the May y/y 2023 read eased to 5.5% from 6.7%. Still, underlying inflation trends aren't favorable for a near term dovish RBA policy pivot. Indeed, the market will remain wary of renewed tightening risks. We get the full Q2 CPI print at the end of July ahead of the next RBA meeting on Aug 6.

  • The chart below plots the headline monthly CPI, the core CPI, which the ABS defines as excluding volatile items and holiday travel, as well as the trimmed mean.
  • Whilst one month data point doesn't make a trend, as the chart suggests, underlying trends aren't gravitating towards the RBA's 2-3% target band.
  • In terms of the detail, the ABS noted: "The most significant contributors to the annual rise to May were Housing (+5.2 per cent), Food and non-alcoholic beverages (+3.3 per cent), Transport (+4.9 per cent), and Alcohol and tobacco (+6.7 per cent)."
  • The only negative category was household furnishings at -1.1%y/y (versus -0.8% in April).

Fig 1: Australian Monthly CPI Trends - Y/Y

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Australia's May monthly CPI was stronger than expected. It printed at 4.0% y/y, versus 3.8% forecast and 3.66% prior. This is the firmest y/y print since Nov last year. Base effects played a role given the May y/y 2023 read eased to 5.5% from 6.7%. Still, underlying inflation trends aren't favorable for a near term dovish RBA policy pivot. Indeed, the market will remain wary of renewed tightening risks. We get the full Q2 CPI print at the end of July ahead of the next RBA meeting on Aug 6.

  • The chart below plots the headline monthly CPI, the core CPI, which the ABS defines as excluding volatile items and holiday travel, as well as the trimmed mean.
  • Whilst one month data point doesn't make a trend, as the chart suggests, underlying trends aren't gravitating towards the RBA's 2-3% target band.
  • In terms of the detail, the ABS noted: "The most significant contributors to the annual rise to May were Housing (+5.2 per cent), Food and non-alcoholic beverages (+3.3 per cent), Transport (+4.9 per cent), and Alcohol and tobacco (+6.7 per cent)."
  • The only negative category was household furnishings at -1.1%y/y (versus -0.8% in April).

Fig 1: Australian Monthly CPI Trends - Y/Y

Keep reading...Show less