TD-MI Inflation, a little on the high side.

August 1, 2011

FOREX, RBA and Interest Rates

The monthly TD-MI Inflation gauge has just been released with a rise of 0.3% in July up from the flat result last month. This has kicked the year on year change up to 3.2% and, for those of us who like to try to interpret charts, the chart below suggests the period of pullback/consolidation in the rise in this monthly index might be ending.

 Source: Bloomberg

This survey includes 90 items in its basket and the net balance was 6 items rose. That is, 28 items increased, 26 items decreased and 40 items remained unchanged.

The last six months sees inflation having risen 1.5% so if we are a bit crude and double that we end up with the top of the RBA’s band at 3% – which is a little on the high side. Equally however you could argue that if this is as bad as it is going to get with all the one-off factors that we have seen in the past 6 months then we don’t really need to worry too much about the inflation picture.

The trimmed, which is really what matters to policy makers was up a more benign 0.2% and the last 6 months has only risen 1%.

This data, to a certain extent, will reinforce any concerns held by the RBA over an acceleration, or potential thereof, in Australia’s inflationary outlook. It is now a question of how hard they want to push this idea at tomorrow’s Board meeting and what weight they give the concerns around their central, mining boom/inflation, tendency.

It really is a case of the RBA having to either face the destruction being wrought on the economy from a high Aussie and consumer retrenchment or worry about inflation. Also out this morning was the Australian industry Groups Performance of Manufacturing index which, like so much data recently, hasn’t been this weak since the dark days of the GFc in 2009. This index crashed from 52.9 last time to 43.4. Equally the HIA new home sales data was out and it too crashed to -8.7% month on month in June.

Hardly a booming economy in need of restraint – we’ll see what the RBA thinks tomorrow afternoon.

Greg Mckenna and the Lighthouse Reserach Team

This blog is for information only and does not constitute advice. Neither Greg McKenna nor Lighthouse Securities has taken your personal circumstances, objectives or financial situation into account. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

If you do need economic, investment or financial advice we are happy to help.

Please Email the team at Lighthouse at or Greg directly on

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