Australia’s producer price gains slow

Prices paid to Australian producers increased slower than predicted, as the producer price index advanced 1 percent after rising 1.9 percent in the first quarter, even though estimates indicated a figure closer to 1.6 percent.

Further details will be available on Wednesday when the consumer price report for the second quarter is due.

This latest development does support the view by the central bank that the 17-year high record inflation may be ending.

This was met by speculation that the data would ease pressure for a further rise in interest rates from the Reserve Bank of Australia (RBA), and as a result the Australian dollar fell.

Despite the speculation, the RBA does not share the newfound optimism as they have already indicated that inflation would increase more than 1.0 percent in the quarter and that a slowdown, which is already being experienced due to the reduced domestic demand, would see price pressures relax over the course of the next year.

Imported goods helped to push down prices, as overall the cost of imported final goods fell 1.0 percent in the quarter and was down 3.2 percent on last year.

On the other hand, the price of domestically produced goods climbed by 1.4 percent in the quarter mainly due to the high construction costs.

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