The TD Securities – Melbourne Institute (TD-MI) Monthly Inflation gauge fell by 0.1% in November, after an increase of 0.1% in October - meaning underlying inflation remains within the RBA's 2-3% target band.
In the twelve months to November, the inflation gauge rose by 2.5% and Annette Beacher, head of Asia-Pacific Research at TD Securities, says that while the price rises in the November report are soft, annual rates for headline and underlying inflation remain firmly at the mid-point.
“We highlight that November is a weak month for price rises in the gauge, which tends to be followed by a decent average seasonal pickup in December.”
Beacher says that, for the December quarter, using mid-quarter prices, the TD inflation gauge rose by 0.2%, led by non-tradable inflation, while the TD gauge trimmed-mean measure also rose by 0.2%.
“These quarterly growth outcomes generate annual inflation of around 2.5%. We will publish our forecasts for the official December quarter CPI with the next Inflation gauge report in January, but we are of the view that underlying inflation will continue to remain close to the mid-point of the RBA 2-3% target range.”
She says today’s RBA Board meeting should be a “non-event,” but, according to consensus, is a close call.
“Better global activity data continues to trickle through, especially from the United States and China, while underlying inflation appears set to remain...well away from the bottom of the range. While it is appropriate to leave an easing bias on the table, we cannot identify a smoking gun for a near-term policy adjustment.”
Contributing to the overall change in November were price rises for bread and cereal products, newspapers, books and stationery, and dairy products.
These were offset by falls in fruit and vegetables, automotive fuel, and holiday travel and accommodation. The price of vegetables fell by 11% in November, while the fuel price fell 4.5%.
The trimmed mean of the inflation gauge was unchanged in November, following an increase of 0.1% in October. In annualised terms, the trimmed mean rose by 0.8% over the three months to November, following a 3.8% rise for the three months to October.
In the twelve months to November, the trimmed mean rose by 2.4%.
Excluding volatile items (automotive fuel, fruit and vegetables), the core inflation measure rose by 0.1% in November, to be 2.6% above its level of a year ago.
The tradable inflation measure decreased by 0.5% in November, while the non-tradable inflation measure increased by 0.2%.