Wednesday’s Inflation Data Key For RBA Outlook

This week all eyes are likely to be on Wednesday’s Q4 and December CPI data. Information since the December RBA meeting signals a further 25bp rate hike at the February 7 meeting and the upcoming CPI data are likely to contribute. Analysts expect headline inflation to rise further in December and Q4, although not to the RBA’s 8% forecast.

• The Judo Bank preliminary PMIs for January print on Tuesday. They have been trending down with contracting services activity driving the composite indicator below 50. Manufacturing remains just above the breakeven-50 level. Given rate hikes and cost of living pressures, the PMIs could be down again in January.
• NAB publishes its business survey for December on Tuesday. Business conditions have been holding up but confidence is declining. The employment and price components of the survey will be closely watched. The December Westpac Leading Index prints on Wednesday.
• On Wednesday, the Q4 and December CPIs are released. Q4 is forecast to rise 1.6% q/q and 7.5% y/y (Q3 1.8%/7.3%) with the trimmed mean +1.6% q/q and 6.5% y/y (Q3 1.8%/6.1%) – in line with the RBA’s forecast. December should rise further to 7.7% for the CPI from 7.3% and 5.8% from 5.6% for the trimmed mean. The measures of domestically-driven price pressures, non-tradeables and services, will be important to watch.
• There are further inflation details on Friday with Q4 PPI and import/export prices.