Chinese food prices lift; Wealth up again

Chinese inflation data; Revised jobs data; Modellers’ database

Chinese inflation: Chinese consumer prices rose by 1.6 per cent in February to be up 2.3 per cent over the year (forecast 1.9 per cent). Producer prices fell by 4.9 per cent over the year (forecast -4.9 per cent).
Food inflation: The lift in Chinese inflation reflects higher food prices, driven by the New Year celebrations. Over the year food prices are up 7.3 per cent with non-food prices up just 1.0 per cent.
Aussie jobs data: The Bureau of Statistics has revised down employment estimates in line with lower population estimates. There were 6,100 fewer people in work in January than previously estimated but no major changes to the month-to-month pattern of job gains or losses. The Labour Force civilian population aged 15 years and over was revised down from 19.42 million to 19.41 million persons.
Rich Australia: In real terms at the end of December, Australians had a record $204.3 billion of household durables like TVs, fridges and washing machines. The value of cars was $131.2 billion.

The inflation data may be seasonally affected with the focus on higher pork prices, but it is still inflation. As a result, the lift in Chinese consumer prices is seen as a “positive”. Demand for pork for New Year celebrations drove prices up over 6 per cent in February to be up 25 per cent on the year. As a result, consumer spending is perceived to be solid; although the higher pork prices may have caused consumers to cut back spending elsewhere.
Outside food, inflation remains low at 1.0 per cent; although it is running at a 3 per cent annual rate on the last two months data. So it bears watching. The timing of Chinese New Year can cause distortions in economic data as has already been apparent in the trade figures.
The latest data showing record dividend receipts and record levels of consumer goods and cars are confirmation of the health of the Australian economy. Income tax payable is also rising in line with stronger job growth.

Consumer prices rose by 1.6 per cent in February to be up 2.3 per cent on the year. The annual result is up from 1.8 per cent in December and above forecasts for a 1.9 per cent gain. It was the fastest rate of consumer prices since July 2014.
Non-food prices rose 0.3 per cent in the month to be up 1.0 per cent over the year – a four-month low. Prices of consumer goods rose 2.6 per cent over the year with services up 1.8 per cent.
Food prices soared 6.7 per cent in February to be up 7.3 per cent on the year. Pork prices rose 6.3 per cent in the month and 25.4 per cent on the year.
Consumer good categories (year to February): Food, tobacco and alcohol 5.8 per cent; Clothing 1.6 per cent; Rent, fuel & utilities 1.3 per cent; Household goods 0.3 per cent; Transport and communication -1.6 per cent; Education, culture and recreation 0.9 per cent ; Healthcare 2.8 per cent: Other goods and services 0.4 per cent.
Producer prices fell by 4.9 per cent in the year to February, firmer than the 5.3 per cent decline to January but in line with market forecasts.

The Bureau of Statistics updates job market data every three months in line with new estimates on population. There were 6,100 fewer people in work in January than previously estimated. But there were no significant changes to the change in monthly estimates. Unemployment still was estimated at 6.0 per cent in January. The February estimates are released on March 17.
The Labour Force civilian population aged 15 years and over was revised down from 19.42 million to 19.41 million persons.

The ABS releases data each quarter that are used in its National Income Forecasting model. Some estimates aren’t published elsewhere.
Some of the interesting findings:
- Dividends received by persons hit a record $33.5 billion in 2015 or around $1,400 per person.
- Income tax payable hit a record high of $193.4 billion in 2015, up 7.8 per cent on the year. Income tax payable is increasing at the fastest annual rate in almost three years.
- In real terms at the end of December, Australians had a record $204.3 billion of household durables like TVs, fridges and washing machines. The value of cars was a record $131.2 billion

- China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.

While it is hard to read too much into it, Chinese consumer prices did lift in February. Inflation is equated with stronger demand, which would be seen as positive in the current environment by investors. Seasonal factors were more likely at work, but the situation bears watching.
Aussie consumers continue to do well. Each quarter incomes continue to lift, meaning more cars and TVs are bought. We assume this is normal, but in other parts of the world with less buoyant economies, income and wealth levels and with lower population growth, accumulation of goods is by no means the norm.