Inflation across the fashion sector is steadily growing out of a recent slump as overall inflation softens.
This is according to new data from the Australian Bureau of Statistics (ABS), which shows that the monthly Consumer Price Index (CPI) indicator rose 2.1 per cent in the 12 months to May 2025.
The largest contributor to the annual movement was food and non-alcoholic beverages, with CPI up 2.9 per cent. This was followed by housing (up 2.0 per cent) and alcohol and tobacco (up 5.9 per cent).
Meanwhile, clothing and footwear CPI has lifted 1.3 per cent in the 12 months to May, up from 0.8 per cent and 0.7 per cent in the previous two months.
This is lower than May 2024 numbers, which were then up 2.8 per cent, and peaked at 3.6 per cent in June 2024, before sliding to 1.9 per cent a month later.
The latest results for May 2025 show that garment inflation is slightly lower than overall inflation for clothing and footwear, with garment CPI up 1.1 per cent. Garments were in deflation two months ago in March, then down 1.4 per cent.
Speaking on overall CPI across all retail categories, ABS head of prices statistics Michelle Marquardt said the 2.1 per cent lift in annual CPI in May this year was down from 2.4 per cent in April and the lowest since October 2024.
The annual trimmed mean inflation – a key figure watched closely by the Reserve Bank of Australia – was up 2.4 per cent in May 2025, down from 2.8 per cent in April and the lowest rate since November 2021. This indicates a positive sign for a more likely interest rate cut in July.
Roy Morgan CEO Michele Levine said while the research firm’s Inflation Expectations was up in mid-June – now at 4.7 per cent compared to 4.6 per cent in May – indications even before the ABS released its CPI data show a cash rate cut on the cards for the next two months. Levine and her team are projecting a 0.25 percentage point cut in July.
Before increasing in recent weeks, Inflation Expectations had decreased in the month of May by 0.2 percentage points from April.
“The increase in Inflation Expectations in recent weeks comes as tensions in the Middle East have increased markedly – especially following the Israeli strikes on Iran which began just over a week ago,” Levine said. “These strikes have led to concerns about the supply of oil and gas to world markets and the potential for these supplies to be disrupted causing a spike in energy prices worldwide.
“As long as tensions remain high and the conflict continues, there remains the chance the confrontation between Israel and Iran will expand to a wider war in the region with the chances of a disruption to energy supplies heightened – and a clear flow on effect to global inflation.”
According to Levine, the conflict has already led to an increase in petrol prices at the pump – now at $1.75 per litre compared to a near three year low of $1.70 per litre in May. Further conflict is expected to continue driving up petrol prices, which could impact inflation itself.
The good news for Australians, Levine noted, is that the official ABS inflation estimates are staying within the Reserve Bank’s preferred target range of 2-3 per cent over the course of the economic cycle. Inflation Expectations have now been within the target range for nine straight months since August 2024 averaging 2.4 per cent during this period.
“Looking forward, the Reserve Bank is expected to lower interest rates in the next two weeks in early July, likely by 0.25 per cent to 3.6 per cent, and next meets in mid-August. By that time the latest June quarterly inflation figures will have been released for the board to consider,” Levine said.
“The sharp reduction in inflationary pressures in the broader economy year during which official annual inflation fell from 4.1 per cent in 2023 to 2.4 per cent in 2024 – a fall of 1.7 percentage points – led to the Reserve Bank cutting official interest rates in mid-February and mid-May by a total of 0.5 per cent to 3.85 per cent.
“The volatility in energy prices, and Inflation Expectations, in recent weeks and months shows just how sensitive Australians are to changes in the prices of essential everyday goods – like petrol.”