Tag: cpi

Kiwi Inflation Eases, But Slowly, So Rates Will Remain Higher For Longer!

On Wednesday Statistics New Zealand released consumer price index (CPI) data for the December quarter. The data showed that New Zealand inflation slowed in the final three months of 2023, despite indicators of domestic price pressures remained stubbornly strong, which came in below the Reserve Bank’s expectations. As a result, it appears that policymakers are likely to hold until there’s a clearer picture of the economy.

“While this is the smallest annual rise in the CPI in over two years, it remains above the Reserve Bank of New Zealand’s target range of 1 to 3 percent,” consumers prices senior manager Nicola Growden said.

The OCR currently stands at 5.5%. While Investors are betting the RBNZ will start cutting the Official Cash Rate in the second quarter and will lower the benchmark to 4.75% by year’s end. But as I discussed recently, policymakers remained concerned about sticky core prices and most economists expect the RBNZ will delay a rate cut until the second half of 2024. In November, the central bank projected that inflation would drop below 3% in the third quarter of this year.

“Inflation continues to move in the right direction,” said Jarrod Kerr, chief economist at Kiwibank in Auckland. “The current state of play and the outlook should be sufficient to see the RBNZ pivot away from rate hikes. Rate cuts are not too far away.”

However, others remain more sanguine. “The divergence between the domestic and imported components of inflation helps to illustrate the big concerns that the RBNZ is trying to balance,”said Satish Ranchhod, senior economist at Westpac Banking Corp.

“Inflation is coming down. That will be important for stabilizing inflation expectations and means that the RBNZ will feel more comfortable keeping the OCR on hold for now.”

Westpac believes the CPI print will keep the Reserve Bank of New Zealand on hold through 2024 because inflation is “still uncomfortably high”.

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Kiwi Inflation Eases, But Slowly, So Rates Will Remain Higher For Longer!
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Kiwi Inflation Eases, But Slowly, So Rates Will Remain Higher For Longer!

On Wednesday Statistics New Zealand released consumer price index (CPI) data for the December quarter. The data showed that New Zealand inflation slowed in the final three months of 2023, despite indicators of domestic price pressures remained stubbornly strong, which came in below the Reserve Bank’s expectations. As a result, it appears that policymakers are likely to hold until there’s a clearer picture of the economy.

“While this is the smallest annual rise in the CPI in over two years, it remains above the Reserve Bank of New Zealand’s target range of 1 to 3 percent,” consumers prices senior manager Nicola Growden said.

The OCR currently stands at 5.5%. While Investors are betting the RBNZ will start cutting the Official Cash Rate in the second quarter and will lower the benchmark to 4.75% by year’s end. But as I discussed recently, policymakers remained concerned about sticky core prices and most economists expect the RBNZ will delay a rate cut until the second half of 2024. In November, the central bank projected that inflation would drop below 3% in the third quarter of this year.

“Inflation continues to move in the right direction,” said Jarrod Kerr, chief economist at Kiwibank in Auckland. “The current state of play and the outlook should be sufficient to see the RBNZ pivot away from rate hikes. Rate cuts are not too far away.”

However, others remain more sanguine. “The divergence between the domestic and imported components of inflation helps to illustrate the big concerns that the RBNZ is trying to balance,”said Satish Ranchhod, senior economist at Westpac Banking Corp.

“Inflation is coming down. That will be important for stabilizing inflation expectations and means that the RBNZ will feel more comfortable keeping the OCR on hold for now.”

Westpac believes the CPI print will keep the Reserve Bank of New Zealand on hold through 2024 because inflation is “still uncomfortably high”.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

US Inflation Still Hanging Around

The US Bureau of Labor Statistics just released their December 2023 inflation read which showed the consumer price index increased 3.4% in the year through December, the most in three months and on a monthly basis, it also rose by more than forecast.

The shift up was driven by Americans paying more for housing and driving, challenging investor bets that the Federal Reserve will cut interest rates soon. Used-car prices increased for a second month, defying expectations for a decline.

The CPI excluding food and energy rose 0.3% in December from a month earlier. On an annual basis, the so-called core measure increased 3.9%. Economists favor the core metric as a better gauge of the trend in inflation than the overall CPI.

Shelter prices, which make up about a third of the overall CPI index and contributed to more than half of its advance, rose 0.5% in December. The gain included a rise in hotel prices that were down in the prior month. Economists see a sustained moderation in this category as key to bringing core inflation down to the Fed’s target.

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US Inflation Still Hanging Around
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US Inflation Still Hanging Around

The US Bureau of Labor Statistics just released their December 2023 inflation read which showed the consumer price index increased 3.4% in the year through December, the most in three months and on a monthly basis, it also rose by more than forecast.

The shift up was driven by Americans paying more for housing and driving, challenging investor bets that the Federal Reserve will cut interest rates soon. Used-car prices increased for a second month, defying expectations for a decline.

The CPI excluding food and energy rose 0.3% in December from a month earlier. On an annual basis, the so-called core measure increased 3.9%. Economists favor the core metric as a better gauge of the trend in inflation than the overall CPI.

Shelter prices, which make up about a third of the overall CPI index and contributed to more than half of its advance, rose 0.5% in December. The gain included a rise in hotel prices that were down in the prior month. Economists see a sustained moderation in this category as key to bringing core inflation down to the Fed’s target.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

No Wriggle Room For The RBA!

The latest monthly inflation read was out today, and it suggests rates will be higher for longer. While there was a drop, some of this was helped by Government intervention, and some other factors in the incomplete monthly numbers were still strong.

The RBA started tightening later than peers, yet shifted to smaller, quarter-point moves earlier. Now, as global disinflation trends beg the question whether Australia will again lag its peers, what’s clear is that the RBA will stay hawkish until it sees credible signs that inflation is moving back to target.

This month’s annual increase of 4.3 per cent is down from the 4.9 per cent rise in October and is the smallest annual increase since January 2022.

http://www.martinnorth.com/

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No Wriggle Room For The RBA!
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The Employment Numberwang Continues…

The unemployment rate rose by 0.1 percentage point to 3.9 per cent in November (seasonally adjusted), up from a revised 3.8 per cent in October, according to data released today by the Australian Bureau of Statistics (ABS).

The ABS said: “With employment increasing by 61,000 people, and the number of unemployed people rising by 19,000, the unemployment rate rose to 3.9 per cent in November.

“The combination of strong growth in both employment and unemployment in November saw the employment-to-population ratio return to a record high of 64.6 per cent and the participation rate reach a new high of 67.2 per cent.

“We have continued to see employment growth keeping pace with high population growth through 2023. The employment-to-population ratio has been high for a long time now, between 64.4 per cent and 64.6 per cent since February 2023, and between 64.3 per cent and 64.6 per cent for the past 18 months.

“Similarly, participation continues to be high. In addition to strong employment growth over the past year, the number of unemployed people has also increased by around 81,000 people, and the unemployment rate has risen by 0.4 percentage points. However, both unemployment measures remain well below their pre-pandemic levels.”

At this point just note that from September 2023, the ABS sample frame has been updated with information from the 2021 Census, with sample selection from the new sample being phased in over eight months from September 2023 to April 2024.

And specifically, The ABS has revised the original Labour Force series from July 2016 to reflect the latest estimated resident population (ERP) based on the 2021 Census (final rebased ERP). So the usual resident civilian population in October 2023 was revised up by around 0.2% (around 37,200 people).

To add to the data tweaks, the incoming November sample had a higher unemployment rate and higher participation, which also helps to explain some of the slightly weird movements this month.

This helps to explain why while employment growth continued into November 2023, rising by 0.4 per cent, monthly hours worked rose by less than 0.1 per cent.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

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The Employment Numberwang Continues…
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The Employment Numberwang Continues…

The unemployment rate rose by 0.1 percentage point to 3.9 per cent in November (seasonally adjusted), up from a revised 3.8 per cent in October, according to data released today by the Australian Bureau of Statistics (ABS).

The ABS said: “With employment increasing by 61,000 people, and the number of unemployed people rising by 19,000, the unemployment rate rose to 3.9 per cent in November.

“The combination of strong growth in both employment and unemployment in November saw the employment-to-population ratio return to a record high of 64.6 per cent and the participation rate reach a new high of 67.2 per cent.

“We have continued to see employment growth keeping pace with high population growth through 2023. The employment-to-population ratio has been high for a long time now, between 64.4 per cent and 64.6 per cent since February 2023, and between 64.3 per cent and 64.6 per cent for the past 18 months.

“Similarly, participation continues to be high. In addition to strong employment growth over the past year, the number of unemployed people has also increased by around 81,000 people, and the unemployment rate has risen by 0.4 percentage points. However, both unemployment measures remain well below their pre-pandemic levels.”

At this point just note that from September 2023, the ABS sample frame has been updated with information from the 2021 Census, with sample selection from the new sample being phased in over eight months from September 2023 to April 2024.

And specifically, The ABS has revised the original Labour Force series from July 2016 to reflect the latest estimated resident population (ERP) based on the 2021 Census (final rebased ERP). So the usual resident civilian population in October 2023 was revised up by around 0.2% (around 37,200 people).

To add to the data tweaks, the incoming November sample had a higher unemployment rate and higher participation, which also helps to explain some of the slightly weird movements this month.

This helps to explain why while employment growth continued into November 2023, rising by 0.4 per cent, monthly hours worked rose by less than 0.1 per cent.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

Will The Inflation Shock Lead To An Interest Rate Hike?

Australia’s CPI inflation came in stronger than expected in the September quarter, with headline inflation rising 1.2% over the quarter versus 1.1% expected and 5.4 per cent annually, according to the latest data from the Australian Bureau of Statistics (ABS).

As noted by Justin Fabo from Macquarie group, “trimmed mean inflation in Q3 was MUCH stronger than the RBA’s August forecast…about 0.4ppts stronger on a year-ended basis”:

And as he notes. “Measures of the BREADTH of quarterly inflation ticked higher and broadly supports the signal from the trimmed mean.

It is also broad based, with“43% of the CPI basket by number rose at an annualised rate of at least 5% in Q3”,

This is going to put more pressure on the RBA to hike rates, potentially on Melbourne Cub day. This is especially because Annual inflation remains elevated, for a range of services such as vets, restaurant meals and hairdressers.

Annual inflation continues to rise for some service categories including rents, dental services and insurance, while inflation for holiday travel has more than halved in the past two quarters. Again, inflation is broad based, you cannot just blame, oil prices for example.

Now, in a speech today RBA Governor Michelle Bullock said “Our focus remains on bringing inflation back to target within a reasonable timeframe, while keeping employment growing. It is possible that this can be done with the cash rate at its current level but there are risks that could see inflation return to target more slowly than currently forecast. The Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation. At the same time, the Board is mindful that growth in demand and the rate of inflation have been moderating, and that there are long lags in the transmission of monetary policy. The Board will receive several pieces of information before its next meeting that will be important for this assessment. This includes a full update of the staff’s forecasts”.

We should also note that the CPI weights are typically updated each year in the December quarter to ensure the weights used in the CPI basket reflect current household spending patterns. But the ABS said that with the continued increase in Australians holidaying overseas, a partial update of the CPI weights has been implemented in the September 2023 quarter. This partial update increases the weight for international holiday travel, with the weight for the other components in the basket adjusted to offset the increase in travel weights. International holiday travel and accommodation was down 3.4%. Convenient, when travel costs dropped, whilst others rose. Just saying.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

Digital Finance Analytics (DFA) Blog
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Will The Inflation Shock Lead To An Interest Rate Hike?
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Will The Inflation Shock Lead To An Interest Rate Hike?

Australia’s CPI inflation came in stronger than expected in the September quarter, with headline inflation rising 1.2% over the quarter versus 1.1% expected and 5.4 per cent annually, according to the latest data from the Australian Bureau of Statistics (ABS).

As noted by Justin Fabo from Macquarie group, “trimmed mean inflation in Q3 was MUCH stronger than the RBA’s August forecast…about 0.4ppts stronger on a year-ended basis”:

And as he notes. “Measures of the BREADTH of quarterly inflation ticked higher and broadly supports the signal from the trimmed mean.

It is also broad based, with“43% of the CPI basket by number rose at an annualised rate of at least 5% in Q3”,

This is going to put more pressure on the RBA to hike rates, potentially on Melbourne Cub day. This is especially because Annual inflation remains elevated, for a range of services such as vets, restaurant meals and hairdressers.

Annual inflation continues to rise for some service categories including rents, dental services and insurance, while inflation for holiday travel has more than halved in the past two quarters. Again, inflation is broad based, you cannot just blame, oil prices for example.

Now, in a speech today RBA Governor Michelle Bullock said “Our focus remains on bringing inflation back to target within a reasonable timeframe, while keeping employment growing. It is possible that this can be done with the cash rate at its current level but there are risks that could see inflation return to target more slowly than currently forecast. The Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation. At the same time, the Board is mindful that growth in demand and the rate of inflation have been moderating, and that there are long lags in the transmission of monetary policy. The Board will receive several pieces of information before its next meeting that will be important for this assessment. This includes a full update of the staff’s forecasts”.

We should also note that the CPI weights are typically updated each year in the December quarter to ensure the weights used in the CPI basket reflect current household spending patterns. But the ABS said that with the continued increase in Australians holidaying overseas, a partial update of the CPI weights has been implemented in the September 2023 quarter. This partial update increases the weight for international holiday travel, with the weight for the other components in the basket adjusted to offset the increase in travel weights. International holiday travel and accommodation was down 3.4%. Convenient, when travel costs dropped, whilst others rose. Just saying.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

Inflation Crawling Lower (For Now), But….

The monthly CPI indicator rose 4.9% in the twelve months to July compared with 5.4% last month. The CPI excluding volatile items was at 5.8% compared with 6.1% last month and the annual trimmed mean was 5.6% compared with 6% last month.

So Annual price rises continue to ease from the peak of 8.4 per cent in December 2022. The most significant contributors to the July annual increase were Housing (+7.3 per cent) and Food and non-alcoholic beverages (+5.6 per cent). Reducing the July increase were price falls for Automotive fuel (-7.6 per cent) and Fruit and vegetables (-5.4 per cent).

But there are a number of data changes which have messed with the data, the numberwangers are at it again!

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

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Digital Finance Analytics (DFA) Blog
Inflation Crawling Lower (For Now), But....
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