Inflation insights: CPI forecasts and economic outlook

By Glenn Dyer | More Articles by Glenn Dyer

One of those weeks (there are four of them) when the most accurate consumer price inflation data comes around—a sure generator of a lot of words, forecasts, and guesses.

This week it's the CPI for the March quarter, the producer price data for the same period, and the CPI indicator for March.

AMP chief economist, Shane Oliver, reckons the various readings (headline and core for both CPI measures) will be a little better than expected.

He forecasted in his weekend note that the March quarter CPI (Wednesday) "is expected to rise 0.7% qoq, taking annual inflation down to 3.4% yoy, from 4.1% yoy in the December quarter, which is slightly below the RBA’s implied 3.5% yoy forecast."

"The key drivers are expected to be increases in rents, education, health, and insurance partly offset by softness in clothing, household goods, utilities, holiday travel, and fuel."

"The trimmed mean is expected to rise 0.7% qoq or 3.7% yoy, which is also just below the RBA’s implied forecast for 3.8% yoy. The monthly CPI for March is also likely to be 3.4% yoy,” Shane Oliver wrote in his weekend note.

And economists at Moody’s think the same way, writing in their end-of-week note:

"The pace of improvement will slow…we expect March data to show inflation has again held firm. That would put overall inflation through the quarter at 3.4%, down from 4.1% in the December quarter.”

Dr. Oliver reminded readers that they should remember that what the Fed does, the RBA doesn’t do (and nor do a lot of other central banks).

“The combination of continuing economic growth, the still-tight labor market, and sticky services inflation mean that the RBA, like the Fed, is in no hurry to cut and that there is a very high risk that our expectation for rate cuts from around mid-year is too optimistic and that cuts won’t come till later this year.

"However, the RBA has not always just followed the Fed—after the GFC it started hiking in 2009 when the Fed was on hold near zero and the RBA was cutting and holding rates when the Fed was hiking over the 2015 to 2018 period.

"And right now, the Australian economy is far weaker than the US—with GDP growth less than half the US pace and consumer spending far weaker,” Dr. Oliver pointed out.

As well as the CPI data midweek, Australian US-listed companies, Atlassian and ResMed are due to report Thursday. And Newmont (which now controls Newcrest) is also down to report Thursday as well.

Fortescue Metals releases its March quarter production report on Wednesday as does fellow Perth miner, Mineral Resources while another WA giant, Northern Star releases its data on Tuesday.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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