The
Australian Producer Price Index (PPI) for the June quarter shocked on the upside
today when it rose by 1.6 % or by 4.5 % in the year to June (expectation 3.8
%). It’s
beginning to look as if Henry will be proved right again about Australian
inflation.

“The circumstances
were not auspicious. Less than two hours before Ben Bernanke, chairman of
America’s Federal Reserve, made his
semi-annual report to Congress on 19 July, new data showed that American
inflation, yet again, was unexpectedly high. The core consumer-price index
(CPI), which excludes food and energy, jumped 0.3% in June and is now 2.6%
higher than it was a year ago, well above the maximum with which Mr Bernanke is
thought to be comfortable.” This is the verdict of The
Economist, the world’s best, and most venerable, business
commentator.

Locally,
economists are braced for a high CPI number later this week. The range of
forecasts is 0.7-1.3 % for the June quarter, and 3.1-3.7 % for the year to June
quarter. TD Securities for 12 month to May suggests 3.2
%.

Apparently even
the Reserve Bank’s favourite measure of “core inflation” has been creeping up
and is expected to be close to 3 % YoY when the latest data is released and
analysed.

The
AFR today says: “The
odds on an interest rate rise next month are shortening with Wednesday’s
inflation figures set to show the economy, stoked by the resources boom, is
accelerating.”

Henry cannot
miss this chance to refer readers to his latest review,
released to coincide with the July meeting of the RBA board. “The Australian
economy is set to continue its strong growth. It has shrugged off a period of
weakness, unemployment keeps falling, business investment is surging and
consumers are spending again. Monetary policy needs to be
tightened.”

Sadly, in regards
to the Middle East, the tenor of the weekend press is consistent with our “Descent into chaos”
theme of Friday. The market for oil
seems largely unperturbed by all this, having pulled back from the latest peak,
so perhaps things aren’t as dire as they may
appear.

Not a bad time to
reflect on the commodity boom. The latest Raff Report
brings us the good oil, and at a lot less than $75 a
pop.

More reading at
Henry Thornton.