Daily Commentary BY THE CURVE TEAM –

CPI and Business Survey Ahead

27th of January, 2021

CPI for Q4 and Business survey data for December are released today.

Timeliness of data releases has taken on new significance during covid. Given the heightened uncertainty of the spread of covid and lockdowns, the outlook and conditions are subject to change instantly.

The business survey data in December will be able to account for the spread of the virus at the end of the month. Intuitively it was known that the end of the month saw a deterioration in conditions and confidence, but it will only show in the business data today.

Unfortunately, the update will be less relevant to current conditions. The spread of the virus has halted which has improved the outlook.

Similarly, inflation for Q4 is released today but is not necessarily pertinent to the current environment. Because inflation has been low since covid began the data may simply be recovering from the low figures earlier rather than reflecting an impactful pick-up in inflation.

The RBA will indirectly account for this with their new stance of needing inflation to be in the target range of 2-3% rather than forecasted to be. This will allow inflation to run hotter than it would have previously.

Josh Stewart

Associate - Money Markets