AUSTRALIA: Australia’s Disinflation As Good Or Better Than Others
The RBA began its easing cycle in February with a 25bp cut bringing the OCR to 4.1% as it had “more confidence that inflation is moving sustainably towards the midpoint” of the 2-3% target band. The trimmed mean, its preferred measure, eased to 3.2% in Q4 and was only 2.8% in January. In the past, it had cited sticky inflation, especially in services, in other OECD countries as something it was monitoring. The latest data show that while it remains stubborn in some place, Australian inflation is either in line or below other countries, which should make further easing possible if this is sustained and inflation continues heading lower.
- The RBA tightened monetary policy after and by less than other countries and as a result began its easing cycle later too. It has only cut by 25bp so far compared with the UK’s 75bp, US’ 100bp, NZ’s 175bp and euro area’s 185bp. The RBA remains cautious though noting that easing didn’t pre-commit it to further moves.
- Australia’s OCR is now below the US’, UK’s and Norway’s, which is consistent with recent inflation outcomes. Only Canada’s and the euro area’s measures of core inflation in January were below Australia’s monthly trimmed mean of 2.8% y/y.
OECD underlying CPI y/y%
- Although still at 3.6% y/y, Australia’s January services inflation was below other major countries, especially the UK at 5.0% y/y where wage growth remains elevated. Canada is the outlier at only 2.8% y/y.
- NZ took a different approach to reigning in inflation hiking rates to 5.5%, 115bp above Australia’s peak, and then easing 175bp compared with Australia’s 25bp. NZ’s core inflation in Q4 was only 0.1pp lower though, while services were still 0.5pp higher at 4.8%.
OECD services CPI y/y%
Source: MNI - Market News/Refinitiv/ABS
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CHINA PRESS: Boosting Consumption Top Priority - Premier
China must prioritise raising consumption levels to expand domestic demand, said Premier Li Qiang during a State Council Executive Meeting. Li said authorities must support a reasonable increase in residents' wages and broaden channels for property income. Multinational firms absorb employment, stabilise exports, and promote industrial upgrading, Li argued, adding officials should expand the scope of industries that encourage foreign investment. China will encourage foreign investment in equities and optimise merger and acquisitions rules. (Source: Yicai)
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China’s Chief Economist Confidence Index reached 50.62 in February, down from 50.66 in January, but remaining above the expansionary 50 mark for the fifth month, reported Yicai.com, who compiled the index. Economists surveyed expect the upcoming Two Sessions to announce targets for GDP growth of 5%, with the fiscal deficit at 4% and CPI below 3%. Lian Ping, president at Guangkai Research Institute, expects central to local government transfers to exceed CNY11 trillion this year, with special local government bonds reaching CNY4.5 trillion and over CNY2 trillion of long-term special government bonds issued. (Source: Yicai)
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China’s Warehousing Index reached 52.5% in January, a 10 month high and up 1.9 percentage points from December, according to the China Federation of Logistics and Purchasing. Yang Biao, deputy general manager of China Reserve Development Co, who contributed to the index, said warehousing activity rose significantly in January driven by holiday consumer demand. The average inventory turnover sub-index reached 53.2%, up 1pp from December, with food, household appliances, agricultural, non-ferrous metals, machinery and equipment sectors higher than 50%, offset by steel and chemical industries which were less than 50%. (Source: Securities Daily)
