In assessing the likely impact of the March quarter consumer price data later today, here’s a reminder from the minutes of the April 5 meeting of the Reserve Bank board which left rates unchanged.
"In the short term, however, the economic data were likely to be significantly affected by the earlier floods and cyclone.
"Headline inflation was likely to be quite high in the March quarter, while GDP would be held down, to a greater extent than earlier assumed, by the lost coal production and the delays in resuming mining operations.
"In reaching its decision, the Board would look through these fluctuations."
So when the expected jump in headline inflation is being reported with some of the worryworts among the commentariat going on about "rate rise looms", ignore it and consider what the RBA is going to do at its next board meeting next Tuesday.
Nothing, except receive updated internal forecasts (which will be published later next week in the next Monetary Policy Statement) and file the figures away to be brought out at the next few meetings for reference.
The March quarter inflation data, out at 11.30 am today, will reveal a sharp acceleration as a result of the flood related boost to fruit and vegetable prices and higher prices for petrol, education and health.
The AMP’s Chief Economist Dr Shane Oliver expects the higher prices to have boosted the headline inflation rate to 1.1% in the quarter or 2.9% year-on-year.
However he says, "consumer caution is likely to have kept underlying inflation benign at just 0.7% in the quarter or 2.3% year on year".
And Westpac’s Chief Economist, Bill Evans says, "We forecast that the average of the two RBA measures of underlying inflation increased by 0.7 per cent in the quarter up from 0.4 per cent in the December quarter – with both measures estimated at a rounded 0.7 per cent.
"That will see annual underlying inflation drop to 2.1 per cent (trimmed mean) from 2.2 per cent.
"We do not believe that the RBA will be particularly unnerved by a near doubling of the core inflation measure in just one quarter.
"Furthermore, even if the print was to stay around 0.7 per cent for the rest of the year it would still only be consistent with the RBA’s current forecast of underlying inflation for 2011 of 2.75 per cent," he wrote last week.
According to a survey from AAP, the CPI is expected to have risen by 1.2% in the quarter for an annual pace of 3%.
For underlying inflation, the median forecast in the AAP survey is 0.6% for a 2.1% annual pace.
Nomura chief economist Stephen Roberts said he expected headline inflation at 1.2% for the quarter for annual rate of 3%.
"The big rising items in the CPI are food, transportation, also education, healthcare, tobacco and alcohol and also housing under pressure from rents," Mr Roberts told AAP.
Mr Roberts said the RBA could raise the cash rate from 4.75%t to 5%t in May if the CPI on a broad range of goods came in on the high side.
"It is contingent on what happens to the CPI next week.
"If the CPI is high but limited to food prices and oil prices, or transportation then the Reserve Bank will read through it and it will be another few months before will get another rate hike," he said.
Last week, figures from the Australian Bureau of Statistics showed that Australia’s producer price index at the final stage of production rose 1.2% in the March quarter, for an annual rise of 2.9%.
That was sharply higher than the 0.1% rise in the December quarter.
In the March quarter, at the intermediate stage, the PPI was up 2.3%, while at the preliminary stage it rose 2.6%.
Over the year to March at the intermediate stage the PPI rose 4.4 % and at the preliminary stage it was up 5.5%, thanks to higher prices for oil and fuels, electricity and water costs.
And the National Australia Bank’s Business Survey in the March quarter showed that business confidence rose six index points to plus 11 points in the March quarter.
(A reading of zero separates expansion from contraction) in this types of surveys.)
"The monthly survey showed a strong relief bounce in February, coinciding with the end of the worst of the flood events," NAB said in a statement accompanying the survey report on Thursday.
Business conditions remained soft at two points, staying where they were in the December quarter.
"The monthly profile shows that conditions fell sharply in January and February as businesses struggled with the impacts of the floods on sales and profits," NAB said.
"It was only in March that there are signs of a strong recovery in conditions."
And quarterly sales figures from Harvey Norman underlined the patchy nature of retailing.
While Woolies and Coles had very strong quarters with sales up 5% to 7%, Harvey Norman says total sales for the third quarter of the 2011 financial year rose 1.6% on a topline basis, but were down a nasty 4.6% on a same store basis.
The company said that for the nine months to March, global sales rose 1.4% to $4.7 billion but like-for-like sales (same store or comparable store sales) fell 3.5%.
The retailer said global sales had been negatively affected by deterioration in the value of the New Zealand dollar, the euro and the UK pound.
But the real damage was done in the company’s biggest market, Australia.
While total sales in Australia were up 3.1% for the third quarter
