The S&P/ASX 200 Index (ASX: XJO) is surging during trade on Wednesday.
The benchmark index was up 0.6% at 11:30am AEST.
That's when the Australian Bureau of Statistics (ABS) reported on the June quarter inflation figures.
In the minutes after the latest consumer price index (CPI) figures were available, investors sent the ASX 200 soaring another 0.6% to be up 1.2% in intraday trading at the time of writing.
Here's why investors are celebrating.
Image source: Getty Images
Why is the ASX 200 lifting off on the inflation data?
The ASX 200 is getting a big boost after the ABS reported that the Consumer Price Index (CPI) rose 1.0% in the June 2024 quarter and 3.8% annually.
"The June quarter rise is the same as the 1.0% rise in the March 2024 quarter," Michelle Marquardt, ABS head of prices statistics said.
"The annual rise of 3.8% for the June quarter is up from 3.6% in the March quarter. This is the first increase in annual CPI inflation since the December 2022 quarter," she added.
The quarterly results are slightly higher than expectations from the Reserve Bank of Australia (RBA), while the annual rise is largely in line with the central bank's forecast.
But inflation came in cooler than most analysts had forecast and as the market had obviously priced in.
National Australia Bank Ltd (ASX: NAB), for example, forecast annual inflation would come in at 4.0%, while Australia and New Zealand Banking Group Ltd (ASX: ANZ) had expected a 3.9% year on year increase.
The cooler than feared figures are spurring the ASX 200 as markets are now paring back the odds that the RBA will lift interest rates from the current 4.35% when the board meets next Tuesday. Though a rate cut at this meeting still looks unlikely.
The biggest factors driving prices higher down under over the June quarter were housing, up 1.1%, and food and non-alcoholic beverages, up 1.2%.
Quarterly housing price growth was driven by a 2.0% increase in rents and new dwellings purchased by owner-occupiers, which increased by 1.1%.
"The continuing tight rental market and low vacancy rates caused rental prices to go up 2.0% for the quarter, following a 2.0% rise in the March 2024 quarter," Marquardt said.
On the ongoing upward pressure in food prices, Marquardt noted:
Fruit and vegetable prices rose this quarter as unfavourable growing conditions drove higher prices for grapes, strawberries, blueberries, tomatoes and capsicums. This was the highest quarterly rise for fruit and vegetables since 2016.
As for the underlying inflation measures, which take out some volatile items like fuel and travel, the annual trimmed mean inflation (which both NAB and ANZ were quoting in their forecasts) was 3.9%, down from 4.0% in the March quarter.
"This is the sixth quarter in a row of lower annual trimmed mean inflation, down from the peak of 6.8% in the December 2022 quarter," Marquardt said.
A trend that's clearly boosting ASX 200 investor sentiment today.
