Aust inflation expected to rise as farm gate prices go up

SYDNEY - Producer prices posted an unexpectedly large rise in the March quarter, suggesting inflationary pressures are building up a little faster than widely expected.

The producer price index for final goods and services excluding exports rose by 1 per cent in the quarter, the Australian Bureau of Statistics said yesterday.

The index, which measures prices at the factory door or farm gate before distribution costs, retailing mark-ups and indirect taxes, was still down by 0.1 per cent over the year, although that means the net fall over the previous three quarters was almost fully erased in just one quarter.

Within the total, the PPI for final domestically sourced goods and services rose by 1.4 per cent to be up by 4.9 per cent over the year.

That suggests the average retail price of tradeable goods, which make up about 40 per cent of the consumer price index, increased at a rate within the 2 to 3 per cent range over the year, after travelling below that rate from late 2008.

The March quarter CPI figures are due from the ABS today.

An AAP survey showed forecasts are centred on a CPI rise of 0.8 per cent in the March quarter and 2.8 per cent through the year. That would follow a quarterly rise of 0.5 per cent and lift the annual rate from 2.1 per cent.

For underlying inflation based on the average of the two measures the ABS publishes at the request of the Reserve Bank of Australia, economists expect 0.7 per cent for the quarter and 3.0 per cent through the year.

- AAP