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 as long as twelve months. On average, the Inflation Gauge’s annual rate tends to overestimate changes in CPI inflation by an average of about 0.10% in any given quarter.
The Inflation Gauge increased by 0.3% during September after 0.10% increases in each of July and August. On an annual basis, the index increased by 2.1%, the same rate as in July but a step up from July’s 2.0%.
Given the Inflation Gauge’s tendency to overestimate, the latest figures imply an official CPI reading of 0.4% (seasonally adjusted) for the September quarter. In annual terms, this implies a CPI figure of around 2.0%, or 0.2% less than June’s comparable figure.
Bond yields finished the day a little lower while the local currency went in the opposite direction. The yield on 3-year ACGBs lost 2bps to 2.09% while 10-year ACGBs remained unchanged at 2.69% and 20-year ACGB yields slipped by 1bp to 3.00%. The Aussie dollar finished the day a little higher at 72.25 US cents.