Our take on the latest Consumers price index (Wed 17 Apr 2019)
Inflation eased to 1.5%pa in March
Non-tradable inflation edged up to 2.8%pa
Petrol prices up 0.7% from a year ago
The key numbers...
- The weaker-than-expected inflation result further opens the door for the Reserve Bank to cut the official cash rate by 25 basis points at its next review on May 8.
- This pick-up in non-tradable inflation suggests that increased domestic cost pressures, including costs associated with the tight labour market, are starting to flow through more into consumer price outcomes.
- Non-tradable inflation is likely to push higher in coming quarters, but weak international price pressures will keep headline inflation subdued, encouraging the Reserve Bank to ease monetary policy.
Consumers price inflation
Annual rates
...and our reaction
- Headline inflation eased from 1.9% to 1.5%pa, coming in below both the Reserve Bank’s and market expectations (1.6% and 1.7%pa respectively).
- A 0.4% annual drop in tradable prices is the biggest decline in 2½ years, with slowing economic growth and overcapacity in Asia leading to renewed downward pressure on some tradable prices.
- Although non-tradable inflation is at a five-year high of 2.8%pa, it is still close to its 10-year average of 2.7% and well below the peak of 4.3% prior to the Global Financial Crisis.
- Significant quarterly price movements included cigarettes and tobacco (up 9.0% due to increased excise duty), fruit (up 8.9%), petrol (down 7.0%), and international airfares (down 12%, reflecting their usual seasonal pattern).
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