The cost pressures seen in the September quarter, especially from government cost increases, seemed to vanish from Australian industry in the three months ending December 31.
In fact, thanks to the continuing strength of the Australian dollar, there’s a whiff of disinflation (not deflation) in the air.
It’s a solid pointer to the expectation that Wednesday’s Consumer Price Index will show that cost pressures remain weak generally throughout the economy.
That would be a partial reversal of the higher-than-expected September quarter CPI of 1.0% (1.3% for the year to September), which was driven by government price rises for gas, water and electricity in many states.
In fact they were still exerting some upward pressure at the preliminary and intermediate stages PPIs in the December quarter, according to the ABS.
Figures from the Australian Bureau of Statistics this morning show the fall in producer prices in the December quarter was in all stages: preliminary, (-0.8%) intermediate (-09%) and final (-0.4%).
That compares to a rise of 0.1% for the final stage in the September quarter, which was something of a surprise, after falls of 0.6% for the intermediate and 0.5% for the preliminary stage.
Overall prices at the final stage fell 1.5% for calendar 2009, 6.5% for the intermediate stage and a huge 8.4% for the preliminary.
The ABS said that in the final stage the fall of 0.4% “mainly due to price decreases in petroleum refining (-6.9%), electronic equipment manufacturing (-9.1%) and industrial machinery and equipment manufacturing (-2.5%).” It was partially offset by “price increases in other agriculture (+11.2%) and building construction (+0.3%).
The ABS said the 0.9% fall at the intermediate stage was due “mainly due to price decreases in grain, sheep, beef and dairy cattle farming (-7.2%), iron and steel manufacturing (–6.6%) and petroleum refining (-3.6%).” It was partially offset by “price increases in oil and gas extraction (+3.0%), metal ore mining (+4.0%) and electricity, gas and water supply (+1.8%). ”
And at the preliminary stage, the main drivers in the fall of 0.8% were “price decreases in iron and steel manufacturing (-6.7%), grain, sheep, beef and dairy cattle farming (-6.2%), basic chemical manufacturing (-5.1%) and petroleum refining (-3.4%). The ABS said that was “partially offset by price increases in oil and gas extraction (+3.0%), electricity, gas and water supply (+1.9%) and services to transport (+4.5%).”
The impact of the stronger dollar can be seen through the three levels of production. That in turn was clearly seen in Friday’s import/export prices indexes, which showed quote dramatic moves in the December quarter and in 2009.
The ABS said the Import Price Index fell by 4.3% in the December quarter and by a record 15.5% in the 12 months top December. The Export Price Index fell 1.7% in the December quarter and a record 32.7% for the year.
But that was after a rise in the Import Price Index of 21.1% in 2008 (driven by the sharp fall in the value of the Australian dollar in the closing months of that year) and by a record 54.9% jump in the Export Price Index in the same year, which was also due to the impact of the dollar’s slide.
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