The latest data from the Australian Bureau of Statistics (ABS) showed the headline consumer price index (CPI) rose 4.3% in the 12 months to November, down from 4.9% in October. 

ABS head of prices statistics Michelle Marquardt said this month’s data is “the smallest annual increase since January 2022” when the inflation rate stood at 4.0%.

However, consumer prices from October to November actually went up 0.4% on a seasonally adjusted basis, compared to 0.0% from September to October.

While this month’s figure was well within industry expectations – ranging from 4.1% to 4.5% – there’s still a long way to go to the central bank’s target of 2% to 3%. 

Excluding volatile items from the monthly CPI indicator, the ABS said the annual rise is 4.8%, still lower than October’s 5.1%.

Is another rate hike coming?

The inflation rate in November shows evidence that price pressures will continue to ease after it peaked at 8.4% in December 2022, validating RBA’s 13 interest rate increases since May last year. 

Following the latest data release, NAB economists maintains their forecast of another rate hike in February to balance the risks around the return to at-target inflation in a reasonable time frame. 

“However, today’s data alone will not push them to hike in February, and much will depend on the degree of comfort the RBA board has for the trajectory of inflation and the path back to the 2-3% mid-point,” NAB senior economist Taylor Nugent said. 

ANZ, however, expects the board to hold the cash rate steady when it meets next month, citing that the October to November prints do not point to quarter four CPI inflation exceeding the RBA’s forecast of 1.0% quarter-on-quarter.

“The RBA will also take confidence from the solid fall in trimmed mean inflation to 4.6% year-on-year in November from 5.3% year-on-year in October, indicating that price pressures are easing for a broader range of goods and services,” ANZ senior economist Catherine Birch said.

Housing costs drove inflation but did Black Friday slow it down?

Significant drivers of the annual increase included housing (up 6.6%), food and non-alcoholic beverages (up 4.6%), insurance and financial services (up 8.8%), and alcohol and tobacco (up 6.4%). 

The prices of new dwellings and rent registered increases in November, thus driving the housing inflation. 

Higher labor and material costs pushed new dwelling prices up 6.6%, while low vacancy rates and a tight rental market brought rent prices up 7.1%.

“The increase in Commonwealth Rent Assistance has reduced out-of-pocket rent costs for eligible tenants since its introduction on 20 September 2023. Excluding these changes to rent assistance, rents would have increased 8.8% over the year to November 2023,” Ms Marquardt said. 

Electricity prices likewise benefited from government subsidies and benefits, such as the Energy Bill Relief Fund. 

Electricity prices rose 8.8% since June 2023. Excluding rebates, ABS said it would have risen to 19% over the same period. 

The recent Black Friday sales appear to have affected measure prices in November, aside from its direct effect on retail trade which rose 2.0% in the same month. 

“As expected, Black Friday discounting activity affected measure prices in November,” CBA economist Stephen Wu said. 

“Prices for a range of goods saw outright declines owing to discounting activity. This is consistent with commentary from yesterday’s November retail trade figures, in which the ABS noted that Black Friday sales are beginning earlier and running for longer.”

Other experts think otherwise. 

Westpac Group senior economist Justin Smirk noted that since the second month of the quarter does not include many household goods, the November CPI may have missed some of the price declines during the Black Friday and Cyber Monday sale events.

Shane Oliver, AMP chief economist, also said the November figures do not reflect the most significant Black Friday discounts on many household items and electronic appliances.

More in-depth inflation data for the December quarter will be released 31 January.

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