The producer prices index advanced 0.1 percent in the October-December period from the prior quarter, when it gained 1.3 percent, the Bureau of Statistics said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg was for a 0.5 percent gain. The index rose 2.7 percent from a year earlier.
Reserve Bank of Australia Governor Glenn Stevens left the overnight cash rate target at 4.75 percent last month, after seven increases since October 2009 helped propel the currency to parity with the U.S. dollar. Today’s figures cover a period before floods devastated parts of northeastern Australia, and a report tomorrow may show annual consumer-price growth at the top of the bank’s 2 percent to 3 percent target range.
“It’s all due to a strong Aussie dollar -- that’s dragged prices down,” said Michael Turner, an economist at RBC Capital Markets Ltd. in Sydney. “We lose that disinflationary force once the currency levels out, which it seems to be doing, and we’ve got a fairly firm domestic price environment,” he said, citing the nation’s low unemployment rate.
RBC forecasts the central bank will raise the benchmark interest rate in the second quarter.
Dollar Weakens
The local dollar fell against its U.S. counterpart following the report, trading at 98.72 U.S. cents at 12:50 p.m. in Sydney from 98.89 cents before the report. It has slid 3.5 percent this year, the second-worst performer among 16 major currencies tracked by Bloomberg.
The report showed the cost of building construction gained 0.8 percent and accommodation increased 8.6 percent. Industrial machinery and manufacturing equipment costs fell 3.2 percent in the fourth quarter and prices for electronic equipment and appliance manufacturing dropped 7.1 percent, it showed.
Traders see a 20 percent chance the central bank will boost borrowing costs by a quarter-percentage-point to 5 percent in May, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. The RBA’s board meets for its first rate decision of the year on Feb. 1.
Annual consumer inflation probably climbed to 3 percent in the three months through December from 2.8 percent in the previous quarter, according to the median estimate of 25 economists surveyed by Bloomberg News. Consumer-price figures are scheduled to be published tomorrow at 11:30 a.m. For the latest updates PRESS CTR + D or visit Stock Market news Today
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