VIEW: ANZ Expects Underlying CPI Eased In February

Australian February CPI is released on Wednesday and ANZ is looking for it to print in line with consensus at 3.5% y/y rising 0.2% m/m. It is forecasting the ex volatile items & holiday travel to ease 0.2pp to 3.9% y/y. It is projecting Q1 CPI to rise 0.5% q/q with the details still showing “elevated non-tradables inflation versus tradables deflation”.

• “The February data will be a better (but not complete) gauge of domestic price pressures, with monthly price changes captured for 76% of non-tradables and 69% of services (by weight), compared with 56% and 47% respectively in January. Health, child care and vet services do not have price changes measured in February.”
• “Alcoholic beverage prices will rise on the back of the biannual indexation of excise rates.”
• “There should be seasonal lifts in clothing & footwear and household goods and services prices following the post-Christmas sales, but they may be smaller than usual, reflecting the softer retail environment.”
• “Rents are expected to stick to their 0.7% m/m pace, while new dwelling construction costs may pick up a touch from January.”
• “Electricity has been a tricky item to forecast each month due to the various government credits being paid at different times. We expect a strong rise in February, assuming the second and final $200 payment to Perth households has run its course.”
• “Automotive fuel prices are forecast to rise 5.4% m/m.”
• “International holiday prices are likely to see another steep drop.”
• “We expect insurance prices will continue to rise but more slowly.”