Investing.com - In a relief to the Reserve Bank and market watchers, Australia's inflation rate softened to 5.6% in May, signaling that the worst phase of price hikes may be behind us.
The Australian Bureau of Statistics revealed last Wednesday that consumer prices had risen at their slowest pace since April 2022. This shift from April's high of 6.8% exceeded economists' forecasts who predicted an easing to around 6.1%.
Despite ongoing price increases across various goods and services, these increments were notably smaller compared with previous months according to Michelle Marquardt from ABS’s prices statistics division.
Housing emerged as one significant contributor to this moderation in Consumer Price Index (CPI) figures with an increase of just 8.4%, down from April’s surge of 8.9%. Rental costs also reflected this trend by growing only marginally faster than they did in April – up by 6.3% against the earlier month's rise of 6.1%.
Food items and non-alcoholic beverages showed an uptick too - bread and cereals saw a jump by nearly thirteen percent while dairy products rose over fifteen percent outpacing their respective increases seen in April.
Interestingly, automotive fuel offered some respite becoming cheaper both on a yearly basis (down by eight percent) as well as monthly (cheaper by almost seven percent).
Ahead next week is RBA’s board meeting where important economic indicators including recent retail sales data and job vacancies will be deliberated upon.
However, concerns persist globally about fighting what has been termed as 'the last mile' battle against inflation which might prove tricky due to conflicting interests - companies wanting higher profit margins versus employees desiring wage growth due to real-term pay cuts experienced earlier.
Meanwhile, currency markets reacted cautiously causing AUD/USD exchange rate to dip temporarily although it managed a slight recovery later on expectations that the central bank might not immediately resort to raising interest rates again come July.
Stock markets looked upbeat amid hopes of borrowing expenses reaching their peak soon; the ASX200 index was trading approximately one-percent higher during the mid-day trade session.
Lastly, the insurance sector recorded an unprecedented twelve-monthly increase touching fourteen-plus percentage points reflecting costlier home contents along with motor vehicle policies per the latest ABS data release.
Conversely, holiday travel & accommodations turned cheaper falling over eleven percent during May alone thanks largely to due Easter holiday season ending coupled with school vacations getting over—annualized though they still posted modest gains moving slower compared prior month when they advanced close to twelve percentage points riding high domestic tourism wave post Covid-19 lockdown lift-off period.