From UBS today:
This week we canvas the results of UBS’s CPI survey for Q212. Given a broad range of forward looking indicators have signalled weaker pricing pressures in Q2, we’ve been flagging that Q2 inflation should be low, possibly surprising forecasts to the downside. But our survey has detected a little more inflation than we’d expected. Inflation is still low, but the risk is it may not surprise as we had hoped.
For the headline CPI, our survey shows a 0.7% rise in Q212, though the y/y pace still edges down to 1.4%, from 1.5%. For the more policy-sensitive core inflation measures, our survey shows an average rise of 0.7% (above the 0.6% forecast we had previously), seeing the y/y pace stay low, but unchanged at 2.1%. Higher prices across food, less discounting in airfares, and an unlikely repeat of the extent of Q1’s disinflation across clothing, household goods & technology are all contributing to a CPI result that looks higher than ‘top down’ macro signals suggested for Q2.
What does this mean for RBA policy? Given the recent stronger GDP and jobs data, and this week’s better retail and housing data, a CPI that doesn’t surprise to the downside certainly decreases the probability of another RBA cut.
