Q1 CPI Data To Ease, Watch Domestic Components

Q1/March CPI data are released on Wednesday and are expected to confirm that inflation peaked at the end of 2022 but that may not be enough to keep the RBA on hold. The quarterly data will include the goods/services and non-tradeables/tradeables breakdown, which should give an indication of trends in domestically-driven inflation. NZ saw a pickup in the non-tradeables CPI in Q1 to 1.7% q/q and 6.8% y/y (Q4 1.5% and 6.6%) and there is a high correlation between Australian and NZ CPI data.

• The Bloomberg consensus has Q1 CPI rising 1.3% q/q and 6.9% y/y, lower than Q4’s 1.9% and 7.8%. NZ’s moderated in Q1 but not as sharply as is expected in Australia.
• Q1 CPI forecasts are spread between 1.2% and 1.7% q/q (with most estimates 1.2-1.4%) and 6.7% and 7.5% y/y (most estimates 6.8-7%). The ANZ, NAB and CBA all expect a 1.3% rise, in line with consensus, but Westpac is forecasting 1.4%.
• Trimmed mean is projected to moderate by less than the headline with forecasts at 1.4% q/q and 6.7% y/y after 1.7% and 6.9% in Q4. Estimates are in a broad range from 0.9% to 1.8% q/q and 6.2% to 7% y/y with most in the 1.3-1.5% and 6.6-6.8% spans. CBA and Westpac forecasts are in line with consensus but NAB is projecting a 1.3% and 6.6% increase and ANZ 1.5% and 6.8%.
• The monthly CPI moderated over January and February and is expected to do so again in March to 6.5% from 6.8%. Expectations are between 6.2% and 7.1% - so some analysts are expecting it to rise. Most forecasts are between 6.3% and 6.6% with NAB at 6.3% and ANZ 6.5%. Electricity prices will be included in March, unlike the previous two months.

Source: MNI - Market News/Refinitiv/ABS

Australia vs NZ non-tradeables CPI y/y%

Source: MNI - Market News/Refinitiv/ABS