The Melbourne Institute’s Inflation Gauge is an attempt to replicate the ABS consumer price index (CPI) on a monthly basis instead of quarterly. It has turned out to be a reliable leading indicator of the CPI, although there are periods in which the Inflation Gauge and the CPI have diverged for periods of up to six-to-twelve months. On average, the Inflation Gauge’s annual rate tends to overestimate changes in the CPI inflation by an average of about 0.10% in any given quarter.
The Inflation Gauge increased by 0.1% during August after a similar increase in July and flat results in June and May. On an annual basis, the index increased by 2.1%, a rate which is higher than June and July’s 2.0% but the same as recorded in May.
Bond yields were largely unaffected while the local currency went a little higher. The yield on 3-year ACGBs slipped by 1bp to 1.99% while 10-year and 20-year ACGBs remained unchanged at 2.52% and 2.86% respectively. The Aussie dollar finished the day around 0.2 US cents higher at 72.10 US cents.