Investors have embraced the bull case that inflation has peaked, and interest rates are close. But that doesn’t mean the pain facing consumers is done.
that should halt the rally that has helped the ASX 200 leap 7.5 per cent since the start of the year and put the benchmark index within touching distance of a record high.
On Monday, Macquarie analysts looked at how Domino’s Pizza Enterprises was lifting menu prices by up to 40 per cent in some regions as it looked to offset cost increases and shore up the profitability of its franchisees. But Jo Masters, chief economist at investment bank Barrenjoey, makes a strong case that for households, the hiking cycle remains closer to the start of it than the finish.
There is clearly some serious catch-up to come. And this will be exacerbated by rate rises in response to still-strong inflation numbers; Masters is holding to her forecast that the RBA will hike by 0.25 per cent in both March and February, taking the cash rate to 3.5 per cent. This helps to explain the robust retail sales figures we’ve seen, both in official data and results from the likes of JB Hi-Fi and Myer.That resilience has also been underpinned by the $260 billion of savings that was built up during the pandemic. But Masters says the savings rate has fallen from 11.2 per cent of disposable income in the March quarter of 2022 to 6.9 per cent in the September quarter.
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