Our take on the latest Consumers price index (Thu 16 Jul 2020)
Annual inflation eases to 1.5% in June
Transport prices down by 4.2%pa
Food inflation up to 3.7%pa
The key numbers...
- Headline inflation eased from 2.5% to 1.5%pa growth in the June quarter. The average price level fell 0.5% from the March quarter.
- In the June quarter, transport, clothing and footwear, and recreation and culture prices fell 4.9%, 3.0%, and 1.3% respectively from the March quarter. Lower demand for goods and services eased price pressures, while temporary price reductions such as free public transport also affected the numbers.
- Tradable prices fell 1.2% from the March quarter, while goods prices were down 0.6% and services prices down 0.2% over the same period.
- Food (up 1.1%) and housing and household utility (up 0.6%) prices crept up from the March quarter as demand for essentials remained steady.
CPI components
Annual % changes
...and our reaction
- Price falls for non-essential and tradable goods and services have contributed the most to soft inflation in the June quarter.
- Weak demand, both globally and internationally, will be a key driver of lower inflation, although global supply issues caused by COVID-19 are likely to create some peculiar price distortions.
- Prices of non-essential goods and services will continue to fall, particularly as job losses mount and consumers cut back on spending.
- Weak inflationary pressures and large disruptions to the labour market mean the Reserve Bank is likely to further ease monetary policy over the next year.
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