Australia’s consumer price inflation (CPI) unexpectedly increased to a five-month high in April. The Australian Bureau of Statistics reported that the monthly CPI rose at an annual pace of 3.6 percent in April, up from 3.5 percent in March and above market forecasts of 3.4 percent. This was due in part to increases in petrol, health and holiday costs, which bolstered expectations that interest rates would not be lowered anytime soon, according to Reuters.
Acceleration in core inflation
Moreover, a closely watched measure of core inflation, the trimmed mean, also accelerated to an annual 4.1 percent, from 4.0 percent. The CPI excluding volatile items and holiday travel stayed at an annual 4.1 percent.
Momentum in private sector business activity
Australia’s private sector business activity gained momentum at the beginning of the second quarter, driven primarily by robust growth in the service sector. According to S&P Global‘s Judo Bank Flash Australia Composite PMI Output Index, private sector activity expanded for the third consecutive month in April, registering 53.6, up from 53.3 in March. This marked the quickest pace of expansion since April 2022.
Read more: Australia’s business conditions hold steady amidst high interest rates: Survey
Positive business environment
The survey revealed that higher business inflows in Australia prompted the private sector’s increase in activity and employment. Australia also witnessed a decline in the rate at which output prices increased despite higher input cost inflation. This business environment maintained firms’ optimism regarding business activity and future output.
Stable business conditions
Business conditions in Australia witnessed minimal changes in March, according to a survey conducted by the National Australia Bank (NAB). Despite facing interest rates at their highest levels in a decade, both sales and employment held steady. Additionally, there was a slight easing of price pressures, although they remained relatively high. The NAB survey revealed that the index of business conditions, which indicates the overall state of business activity, decreased by 1 point to +9. However, this level still reflects above-average activity compared to the past year.
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