Australia's trimmed mean inflation came in higher than expected in July, printing at 0.5% month over month and increasing the likelihood of a rate hike in November, ANZ said in a Wednesday report.
The three-month annualized trimmed mean inflation reading hit its highest level on record at 4.7%, and the diffusion index jumped sharply with 61% of the basket rising more than 3% in July.
"The result suggests trimmed mean inflation is likely to overshoot the Reserve Bank of Australia's expectations for [the third quarter]," ANZ said.
Relative to the bank's forecasts, the biggest upside surprises were in discretionary segments such as clothing and footwear, restaurant meals, and furnishings, while domestic holiday travel was also stronger than expected.
Additionally, the data showed very little signs of second-round pass through in the food group, including expenditure classes that were previously rising like cheese and fruit. Meanwhile, the slowdown in the housing market may be flowing through to new dwelling costs, which rose 0.4% month over month, ANZ said.
"Overall, the data suggests the demand backdrop may not be as weak as we previously thought," it said.
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