Australia Core Inflation Steady at 2.7% as Trade Prices Dive

Australia’s core consumer prices rose in line with expectations in the second quarter, while trade prices fell sharply and retail spending strengthened, offering mixed signals ahead of the Reserve Bank of Australia’s next policy meeting. Trimmed-mean and weighted-median CPI, the measures closely watched by the RBA, each increased 2.7% from a year earlier and 0.6% from the previous quarter. The annual pace remains within the central bank’s 2%-3% target band, although the quarterly trimmed-mean gain was a touch below the 0.7% forecast. In contrast, the Australian Bureau of Statistics reported that export prices dropped 4.5% quarter-on-quarter, a steeper fall than the 3.0% decline economists had predicted, while import prices slipped 0.8%. The deterioration follows a 2.1% rise in export prices and a 3.3% jump in import prices in the first quarter, underscoring weaker global commodity demand. Domestic demand showed resilience. Retail sales rose 1.2% in June compared with May, triple the consensus estimate. Adjusted for inflation, retail turnover increased 0.3% in the quarter, ending a run of flat growth. The combination of subdued core inflation, falling trade prices and firmer household spending will factor into the RBA’s deliberations as it weighs the need to keep policy restrictive against signs of cooling external price pressures.