Wholesale inflation at a 13-year high

·2-min read

An index that measures cost increases for businesses hit a 13-year high in the 12 months to June, but its rate of increase appears to be moderating.

The Producer Price Index (PPI) rose 1.4 per cent in the June quarter, compared to a 1.6 per cent rise in the March quarter, the Australian Bureau of Statistics reported on Friday.

The index's 5.6 per cent jump in the past 12 months is its strongest increase since the oil shock in December 2008.

The biggest contributors to the growth in final demand were the output of building construction, driven by supply constraints, high freight costs and labour shortages; petroleum refining costs; and heavy and engineering construction.

The PPI is the flip side to the Consumer Price Index, measuring the price change of goods and services as they leave the factory gate, from the perspective of the industries that produced them.

It's sometimes referred to as "wholesale inflation", compared to the CPI's "retail inflation".

Besa Deda, chief economist with St George Economics, said the PPI wasn't as closely watched as it once was, and didn't change the bank's view that headline inflation would peak at 7.5 per cent next year.

Friday's figures are "slightly softer" from the March quarter data, Ms Deda noted.

"Perhaps the peak is here," she told AAP.

"That's ... what we're hearing from our customers."

Supply chains remain disrupted but the situation is not as bad as it was earlier in the year, Ms Deda added.

AMP senior economist Diana Mousina agreed, saying that shipping costs, air freight and container costs, and commodity prices other than oil, were all declining.

But she added that Friday's figures for the June quarter were "still pretty high, compared to what you normally see".

"More signs that inflation remains high for a number of industries across Australia, not just consumers," she said.

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