News: AUD 2022-11-30 14:00

Australia sees unexpected drop in October inflation

Monthly inflation data not only provides a more timely look at Australia's inflation than the old quarterly series, it has also ushered in some welcome lower numbers
Both headline inflation and core rates fall in October
Against expectations for an increase, both headline and core inflation rates for Australia's monthly inflation series fell in October. The headline inflation rate fell from 7.3% year-on-year in September to only 6.9% YoY in October. The monthly trimmed mean index inflation rate also fell slightly, to 5.3%YoY from 5.4%.

When we examine the components of the index, we can see that most of the current rate of inflation is being driven by housing components (in particular house purchase costs), food and beverages, and transport. However, this month, it was smaller increases in recreation as well as some moderation in the high rates of food price inflation that led to the lower-than-expected figure for October.

The particular recreation sub-component that provided the biggest impact to the headline rate was holiday accommodation and travel. The Australian Bureau of Statistics (ABS) says of this component "The monthly fall in holiday travel and accommodation was driven by the conclusion of the school holiday period and the end of the peak tourist season for travel to Europe and America".
What now for the Reserve Bank of Australia?
This drop in inflation vindicates the Reserve Bank of Australia's (RBA) dovish pivot some months ago when it decided to only increase rates at a 25bp per meeting pace. At 6.9%, inflation is still way too high for comfort, but we believe that the RBA will see this as confirmation that it is on the right track, and that further declines could lead them to entertain thoughts of a pause in rates.

We are currently forecasting a fairly low peak in the cash rate target at only 3.6% in 1Q23 next year. But while there remains considerable uncertainty about the future path of both inflation and rates, today's numbers provide us with some encouragement that we are not too far off the right track.
Recent events
2023-01-25 14:03
News 426
German Ifo index improves again in January

Germany’s most prominent indicator has improved for the fourth month in a row, but the renewed optimism is still based...

2023-01-18 18:56
News 777
US production plunge adds to fears we could already be in recession

Coming on the back of the weakness in retail sales, the steep drop in industrial production and news of more job lay-off...

2023-01-18 18:54
News 789
Fed reaches the end game as US data disappoints yet again

Widespread falls in key retail sales components and broadening signs that inflation pressures are rapidly moderating mea...

2023-01-18 18:53
News 739
Bank of Japan defies market speculation; keeps policy steady

In keeping its key rate and yield curve control policy unchanged at today's meeting, the Bank of Japan probably wanted t...

2023-01-18 18:51
News 647
Jump in UK services inflation provides ammunition to BoE hawks

Headline inflation has peaked but pressure from the service sector continues to build. That's likely to tip the balance ...

2023-01-13 19:09
News 769
German economy still defies recession

The German economy grew by 1.9% in 2022. This implies a stagnating, not contracting, economy in the fourth quarter. Will...

2023-01-13 19:06
News 816
China’s export contraction means more infrastructure spending to support recovery

China's exports and imports continued to contract in December. This signals weak external demand which could hamper the ...

2023-01-09 14:37
News 975
German industry stagnates at too low level

Industrial activity in November provided more evidence that the economy did not fall off a cliff in the fourth quarter b...

2023-01-05 11:46
News 1466
German exports weaken further in November

Exports continue to weaken, suggesting that recession fears are real

German export weakness continues. Ge...

2023-01-04 22:51
News 1547
US jobs numbers could soon start to turn

Today’s data offers further further evidence that labour demand remains strong despite clear signs of a weakening econ...

2023-01-04 14:30
News 1495
German inflation drops to 8.6% in December

Lower oil and gasoline prices and the first phase of the government's gas price cap have pushed down headline inflation ...

2022-12-31 15:36
News 1741
BOJ considering raising inflation forecasts to near 2% target -Nikkei

The Bank of Japan (BOJ) is considering raising its inflation forecasts in January to show price growth close to its 2% t...

2022-12-30 12:04
News 851
South Korea: CPI inflation unchanged in December

Entering 2023, we expect headline CPI to head down to 4%. Gasoline prices and utility fees are set to rise meaningfully ...