Energy cost rises filter through
Consumers may face higher prices in coming months due to a rise in business energy costs.
Data released on Friday shows prices at all levels of production jumped in the September quarter as the lower Australian dollar lifted import prices, particularly petrol. Utility prices, including electricity, also rose.
"The higher business inflation reading coupled with the larger CPI reading last week does seem to suggest that inflation has bottomed out," CommSec economist Savanth Sebastian said in a note to clients.
The consumer price index rose 1.2 per cent in the September quarter, the largest rise in a year.
Friday's producer prices index (PPI) report, alongside figures showing a further strengthening in house prices and improved manufacturing activity in both Australia and China, cemented expectations for no change to the cash rate when the central bank board meets on Tuesday.
Mr Sebastian expects the Reserve Bank to keep interest rates on hold over the next couple of months.
"It looks very likely that the low point in the rate cycle has been reached," he said.
Friday's PPI at the final stage of production rose 1.3 per cent in the September quarter, the biggest increase in three years. Import prices surged 5.9 per cent in the quarter, reflecting the lower dollar, while domestic prices showed a more modest 0.8 per cent increase.
Producer prices overall come off a low base, which left the annual rate of 1.9 per cent below the RBA's 2-to-3 per cent inflation target band.
However, the RBA will be keeping an eye on house prices, which rose a further 1.3 per cent in October, according to the RP Data-Rismark Home Value Index.
Prices are 7.9 per cent higher over the year, having risen by 6.9 per cent in the past five months.
Manufacturing grew for a second month in a row as production rose for the first time in 2½ years and new orders continued to recover.
The Australian Industry Group Performance of Manufacturing Index rose 1.5 points in October to 53.2, holding above the key 50 mark that indicates activity is expanding.
Ai Group chief executive Innes Willox said, while the result was encouraging, the domestic currency remained a barrier to export growth.
"Manufacturers' margins remain under pressure as wage and non-wage costs continue to rise ahead of selling prices," Mr Willox said.