Australia | Jun 04 2007
By Rudi Filapek-Vandyck
The TD Securities/Melbourne Institute Monthly Inflation Gauge rose 0.1% in May. The benign growth figure follows an equally benign 0.1% rise in April. Over the twelve months to May, the TD/MI Inflation Gauge rose by 2.6%, confirming the overall trend seems to be decelerating with inflation growth moving within the top end of the Reserve Bank of Australia’s target range.
May’s growth figure is the lowest annual increase in the TD-MI Inflation Gauge since March 2006.
Contributing most to the overall increase in the Inflation Gauge in May were rises in automotive fuel, fruit and vegetables and house purchase costs. These were largely offset by price decreases in audio, visual and computing, bread and cereal products, and holiday travel and accommodation. The price of petrol rose by 2.7% during May.
The trimmed mean of the TD/MI Inflation Gauge, a measure of underlying inflation, also rose 0.1% in May, following a 0.1% rise in April. The trimmed mean rose by 2.6% over the year to May 2007.
Dr Don Harding, an economist at the University of Melbourne and co-creator of the Inflation Gauge, was quoted in the press release as saying that “Headline ABS Inflation is forecast to be 0.98 per cent in the June Quarter. This forecast is made by averaging two inflation forecasts of 0.75 and 1.34 percent respectively.”
“Last month I observed that it may be that the ABS CPI and the Inflation Gauge are picking up different aspects of the story about price pressure in Australia. I suggested that this is likely because of the large gyrations in the prices of volatile items which may amplify differences in methodologies. If this is the case we can expect to see the two measures of prices move back towards each other over the coming months. This would manifest itself in inflation for June being near the higher of the two estimates given above.” added Dr Harding.
During the month of May prices rose in 33 expenditure classes, fell in 22 and remained unchanged in 35 expenditure classes for a net balance of 11 price rises. Dr Harding believes this suggests that inflation pressure was more widespread in May than is suggested by the published headline inflation number.