Rising inflation will put additional strain on industry profit margins if today's Australian Bureau of Statistics (ABS) quarterly inflation data is a guide.

Inflation rose by 0.9 per cent during the September 2005 quarter and by 3.0 per cent during the year to September.

Key components of the September 2005 quarter inflation data are:

• Automotive fuel (11.6 per cent), house purchases (1.2 per cent), domestic holiday travel and accommodation (3.4 per cent), property rates and charges (5.0 per cent), beer (1.8 per cent), overseas holiday travel and accommodation (2.0 per cent), fruit (3.0 per cent), restaurant meals (1.4 per cent), rents (0.6 per cent), electricity (1.7 per cent) and water and sewerage (3.0 per cent).  
  
  
• Partially offsetting these increases were falls in pharmaceuticals (4.8 per cent), deposit and loan facilities (0.7 per cent), audio, visual and computing equipment (1.7 per cent) and telecommunication (0.7 per cent).

For the year to September 2005 prices in the tradable sector rose by 2.6 per cent compared to price rises of 3.4 per cent in the non-tradable sector.

If the influence of higher oil prices were excluded, total inflation would have risen by 0.5 per cent during the quarter. If volatile items are excluded, core inflation would have risen by 0.6 per cent during the quarter and by 2.4 per cent during the year to September.

The September quarter outcome follows the release of producer prices on Monday which showed that prices for final stage goods rose by 1.5 per cent during the quarter and by 3.4 per cent through the year to September.

Prices for intermediate goods were reported to have risen by 2.5 per cent during the quarter and by 4.9 per cent through the year to September, while prices for preliminary goods rose by 3.4 per cent during the quarter and by 6.5 per cent through the year to September.

Interestingly, prices of imported goods at both the preliminary and intermediate stage were reported to have risen at a faster rate than their domestic equivalents largely due to higher oil prices.

The price index of materials used by the printing industry rose by 0.5 per cent during the September quarter - up by 0.9 per cent compared to a year ago. The price index of articles produced by the printing industry increased by 1.3 per cent during the quarter - up by 0.8 per cent compared to a year ago.

Printing Industries Manager, Industry and Commercial Policy, Hagop Tchamkertenian, expressed concern on the ability of businesses to continue to absorb increasing costs.

"The September 2005 quarter inflation data is pointing to an upward trend in inflation," he said.

"While headline inflation is now threatening to break out of the Reserve Bank's target range of 2-3 per cent, we are unlikely to see official interest rates rise straight away as most of the latest rises in inflation are due to external related factors such as oil prices. Core inflation is still well within the target range.

"These external factors are placing pressure on profit margins. The producer prices data shows that there were higher price changes at both the preliminary and intermediate stages compared to the final goods stage. This clearly indicates that businesses have decided to absorb increased costs rather than pass them on," Mr Tchamkertenian said.

He said there was a limit to the cost absorption capacity of industry.

"Sooner rather than later businesses will be forced to pass on the costs if external cost pressures don't subside" he said.

To access the September quarter inflation data please click here.