Australia's PPI rises 0.6% in September Quarter

Australia's producer price index ( PPI) at the final stage of production rose 0.6% in the September Quarter, up 2.7% through the year to the September Quarter Y 2011, data from the Australian Bureau of Statistics showed on Monday.
Economists' forecasts had centered on a September quarter PPI rise of 0.8%.

Economists believe that the lower-than-expected figure of Australia's final PPI shows signs that inflationary pressures eased a bit in the Australian economy and the central bank may keep the cash rate on hold for longer than previously expected.

This is consistent with what the Reserve Bank of Australia ( RBA) is thinking would be happening and the fact that they seem to have reduced their concerns about inflationary pressures building, Global banking Giant HSBC chief economist Paul Bloxham said.

The PPI, which measures prices at the factory or farm gate, is a key measure of inflation and can influence expectations for the more important consumer price index (CPI).

Mr. Bloxham said the data suggests Wednesday's consumer price index (CPI) may come in lower than market forecasts.

I think the Reserve bank has become less concerned about inflationary pressures building in the Australian economy but at this stage we think it is still likely to keep them on hold rather then cut interest rates, Mr. Bloxham said.

Australian investment bank Macquarie Group senior economist Brian Redican says if the September Quarter CPI, the key measure of inflation, is as low as the PPI, then an interest rate cut is a possibility in November.

We think if you get that sort of 0.6%outcome for consumer prices in Q-3 that opens the door for a rate cut in November, so we think it is a real possibility, he said.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.