Producer Price Index 1.3% Rise Not Expected to Affect RBA
Wednesday January 28, 2009
The producer price index has reported a surprising 1.3 per cent rise in the December quarter to 6.4 per cent. Although this is not expected to stop the Reserve Bank of Australia from cutting interest rates further, sparing consumers with retailers expecting to feel increased costs.
The index is a gauge dependent on prices received at the factory gate for non-export goods and services at the final stage of production, with the Australian Bureau of Statistics separating between capital and consumer goods and services.
According to the ABS, this rise marks the fastest surge in the data series in over ten years however there were significant declines in manufacturing and construction costs as petrol prices fell.
The producer price index is used as a reflector for inflationary pressures, with these latest figures showing that consumer price inflation were higher than expected for the December quarter.
Import prices at the final stage of production surged by 16.4 per cent in the year to December.
Furthermore, the final consumer goods price index marked a 1.1 per cent rise to 6.5 per cent although this is considered fairly insignificant to the Reserve Bank of Australia due to external pressures on inflation such as the lower Australian dollar boosting import prices.
Economists and debt futures markets have predicted the RBA to cut interest rates by up to 100 basis points, lowering the cash rate to a 45-year low of 3.25 per cent.
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