TD-MI Inflation Gauge MoM

The Melbourne Institute Monthly Inflation Gauge, called TD-MI with TD Securities to the February 2016 issue, tracks monthly price moves for Australian households. The rename kept content and data unchanged.

Its publisher is the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne, running it since 2002. It tracks more than 1000 prices across major capital cities covering each spending class in the official Consumer Price Index (CPI). It is a monthly guide to CPI trends, not official inflation and not a survey of inflation expectations.

Prices are collected during the reference month, with no exact within-month dates stated, and the report follows with a lag of one month. Release is embargoed for 11am Sydney/Melbourne time, Australian Eastern Standard or Daylight Time, normally the first Monday after the reference month, except December in mid-January. Each release gives headline, the main index, MoM and YoY change, key drivers, trimmed mean, an underlying average, plus economist commentary and household cost-of-living detail. Subscribers get extra tables and Gauge versus CPI charts; no revision rule is stated and estimates update as more prices arrive.

Monthly moves come from prices in the 87 spending classes, read against the external Reserve Bank of Australia target band of 2-3%.

• Fruit and vegetables: covers fresh produce prices, a volatile item in the basket.
• Automotive fuel: tracks motor fuel prices, volatile from month to month.
• Alcohol and tobacco: covers alcohol and tobacco prices.
• Holiday travel and accommodation: tracks trip and lodging prices.
• Furniture and furnishings: covers furniture and furnishing prices.
• Utilities, health, clothing and footwear: tracks water, sewerage, property rates, health services, clothing, footwear and household appliance prices.

The July 2015 release (published August 3, 2015) showed headline growth of 0.2% MoM after 0.1% in June, reaching 1.6% YoY. That was a third straight pickup in the annual rate. Property rates rose 3.3%, other food 5.5% and non-alcoholic drinks 2.8%. Water and sewerage fell 3.6% on a one-off state rebate, while alcohol and tobacco fell 1.6% and fuel fell 2.3%. Trimmed mean rose only 0.1% MoM and 1.5% YoY, showing how trimming absorbed the rebate dip and food spike.

1. Collect: survey more than 1000 monthly prices from Australian firms and organisations across major capital cities.
2. Group: sort items into 87 spending classes and compute each class MoM % change.
3. Headline: combines class moves by official CPI method as 100 x (P_t - P_{t-1}) / P_{t-1}, on an index set at 100 in August 2002.
4. Trimmed mean: rank class changes and average only moves between the 5th and 95th percentiles to cut outliers. For illustration, a 9.0% spike can lift a 20-class headline to 0.5% while the trim stays near 0.3%.
5. Ex-volatile and tradable splits: repeat the headline without fuel, fruit and vegetables, and split classes by foreign competition exposure.
6. Companion rates: derive 3-month annualised, quarterly-average and 12-month moves, with middle-month quarterly reads for ABS comparison.
7. Direction counts: count rising, falling and unchanged classes for net balance, rising minus falling, whose shifts may signal pressure changes.