Price pressures are building beyond the headline rate of inflation. At the same time, the trimmed mean inflation rose 0.3% mom and 3.2% yoy. Even with this robust growth, we’re seeing uneven trends among industries, especially in construction, housing, energy, and services.
In November, Australia experience a decline in its yearly inflation rate from 3.8% to 3.4%. This drop surprised analysts, who had been forecasting a 3.6% rate. The data continues to show the highly volatile nature of the main components fueling inflation, especially in the goods sector and the service sector.
Housing and Electricity Prices Impact Inflation Trends
Housing continued to be the biggest driver of annual inflation, with shelter prices increasing 5.2%. This increase has a long-term devastating effect on the overall cost of living for many Australians. For communities, housing continues to be a top issue for residents.
Electricity prices were a major factor in creating the inflation picture. While electricity prices increased by 19.7% Y/Y, that’s a significant retreat from last years’ inflationary highwater mark of 37.1% Y/Y. This throttling of electricity price escalation is a slight consumer reprieve in an otherwise inflation-crushed world where the cost of living is skyrocketing.
At the same time, annual goods inflation accelerated, moving down from 3.8% Y/Y to 3.3% Y/Y. This increase is mostly explained by the withdrawal of squeezing inflationary pressure from power prices. As energy prices settle into a new normal, there is room for more change in both consumer spending patterns and the broader economic climate.
Services and Food Prices Show Mixed Signals
The services sector similarly reported an inflation drop, with inflation rates extant in that sector dropping from 3.9% Y/Y to 3.6% Y/Y. This decline has been attributed to lower demand for domestic leisure travel as consumers changed their spending patterns from pandemic-era savings.
Food and non alcoholic beverage prices went up by 3.3%. This bump just compounded the additional inflationary pressures households are facing. Transport has jumped 2.7%. We know that this increase is another blow to Australian consumers who are already navigating the impacts of rising costs across the board.
These mixed signals from all sectors of the economy are a sign of a difficult inflation environment. Though some have stabilized or are shrinking, there’s still counter-pressure by others which continue to push steam upward on consumer prices.
International Context and Future Outlook
The twin shocks of gas prices and farm output for Australian inflation data performance could hardly be more opposite to the latest outcomes from Europe. Germany’s national inflation rate came in at 0.2% MOM and 2% YOY. This was well below consensus expectations, which were for 0.4% m/m and 2.2% y/y. French inflation numbers came in below expectations. They reported at 0.1% MoM, when economists were expecting 0.2%. The annualized rate came in at 0.7%, below expectations.
European-wide inflation is 0.2% MoM, and 2% YoY. This patchwork of governmental priorities creates serious complications for policymakers as they face down inflationary pressures from coast to coast.
Looking ahead, analysts expect the next few Consumer Price Index (CPI) releases to show reductions in inflation. They expect it to eventually fall below their 2% target. Energy base effects and changing consumer habits would be behind this possible drop. Households are quickly adjusting to the new normal, that is extremely important, too.