The ASX200 gained 34.60 points or 0.44% to 7,814.80 today, despite fears that February’s consumer price index (CPI) data would put a damper on trading.
CPI stayed steady at 3.4% year-on-year while underlying inflation minus volatile price movements fell to 3.9% from 4.1%. More on that in a moment.
The ASX sectors were on a tear today, with all but Info Tech (-0.60%) and Utilities (-0.23%) rising.
Consumer Staples and Healthcare made particularly strong progress, both up about 1.30%, with Industrials (+1.14%) not far behind.
Woolworths and Coles were strong movers for Consumer Staples, adding 1.88% and 1.32% respectively, while in Healthcare, CSL Ltd added 1.36% and Resmed Inc (NYSE:RMD) gained 1.91%.
Commodities went the opposite way of the sectors, in the negative almost across the board. Only aluminium (+0.22%) and gold (+0.06%) resisted the downward pressure.
Over the last five days, the ASX has gained 1.55% and sits just 0.49% off its 52-week high.
CPI data brings more good than bad
Moody’s Analytics economist Harry Murphy Cruise joins us to discuss the latest Australian consumer price index (CPI) data from February and what it means for the market.
“Having sprinted lower in the backend of 2023, Aussie inflation took another breather in February,” Cruise writes.
“Headline inflation stayed put at 3.4% year-on-year (y/y), equalling the December and January prints. That stay doesn’t mean progress on inflation has stalled.
“Stripping out volatile price movements, underlying inflation fell to 3.9% from 4.1% previously.
“What’s more, partial data suggests inflation is on track to ease to 3.35% y/y across the opening quarter of this year, down from 4.1% in the December quarter.
“Still, there are areas to keep a close eye on. The February inflation print was the first real glimpse at service prices this year; the inflation basket for January is heavily weighted towards goods.
“The February print showed services inflation remaining sticky, edging up to 4.2% from 3.7% previously. What’s more, non-tradable inflation lifted to 4.8% from 4.7%, suggesting there are pockets of domestic activity that are a handbrake on inflation’s retreat.
“Regardless, the good news far outweighs the bad. Inflation is making strong progress as it tracks towards the top of the Reserve Bank of Australia's 2% to 3% target band.
“We see inflation falling to 3.1% by the end of the year and returning to the midpoint of the band by the middle of 2025.
“All that reinforces our view that RBA’s next move is down.
“We expect that to happen in September after the RBA sees the early impacts of the stage three tax cuts starting in July."
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