Commonwealth Bank of Australia:
- For the July monthly CPI, we see inflation increasing by just 0.1% in the month, taking the annual rate down to 4.7%. Strong growth in rents will remain a driver of inflation, but falls in household goods and petrol prices can provide an offset.
- The monthly CPI indicator remains just that, an indicator , and as such can be volatile. The first month of the quarter disproportionally captures goods, which are seeing stronger disinflation than services. As such, it is likely the annual rate will rise back a bove 5% in August when other key current drivers of quarterly inflation are measured .
National Australia Bank:
- The July Monthly CPI Indicator (Wednesday) is the key data release to watch , Building Approvals, Lending Indicators and some pre-GDP partials are also out this week.
- As for the July monthly CPI, our economists note the release will be heavily weighted to goods and so it will get all the benefit of (likely) goods disinflation and little of the read from still-high services inflation (the August print will contain greater services coverage). Thus, NAB expects a fall to 4.9% y/y from 5.4%, below the 5.2% consensus, with higher CPI readings expected in August and September.
Westpac:
- The Monthly CPI Indicator lifted 0.7% in June to be up 5.4%yr, a moderation from the 5.5%yr in May and 6.7%yr in April. The June print was softer than anticipated with the reported annual pace moderating significantly faster than the quarterly CPI which reported growth of 6.0% in the year to the June quarter.
- The Monthly Indicator is not a true monthly inflation measure but rather the release of the data from the quarterly CPI as it becomes available. A lot of the data is monthly but a fair proportion is only available quarterly (and appears in the month of the quarter the survey is conducted) while a smaller proportion is annual.
- Electricity presents a key risk this quarter both in terms of the impact of state energy rebates and the timing of bill increases. The ABS recently introduced a monthly electricity price series for the CPI but it only goes back to September 2017 so we don’t have a good handle on the monthly seasonality of electricity price changes.
