Inflationary pressures in New Zealand remain weak

  • New Zealand CPI rose 0.5% in the March quarter, leaving the change on a year earlier at 1.1%.
  • The annual increase was the weakest since the September quarter of 2016.
  • Underlying inflation was marginally stronger, but still in the middle of the RNBZ’s 1-3% annual inflation target.

Inflationary pressures in New Zealand remain weak.

According to Statistics New Zealand (StatsNZ), consumer price inflation grew 0.5% in the March quarter, a result that was bang in line with market expectations.

The result was stronger than the 0.1% increase reported in the final quarter of 2017.

StatsNZ says higher alcohol, tobacco, food and housing-related prices was partially offset by falls in education and transport costs.

Source: StatsNZ

Despite the acceleration in CPI seen over the quarter, the annual rate of change slowed, falling from 1.6% to 1.1%, leaving it at the lowest level since the September quarter of 2016.

Source: StatsNZ

“[This was] due to decreases in tertiary education prices and international air transport, and smaller increases in food prices,” StatsNZ said.

“Housing and household utilities made the largest upwards contribution to the 1.1% CPI increase, influenced by construction and rent prices.”

StatsNZ said tradable prices — those largely determined by offshore factors — fell 0.4% over the year, helping to offset a 2.3% increase in non-tradable prices over the same period.

The headline year-on-year result was in line with market expectations, and at the lower end of the Reserve Bank of New Zealand’s 1-3% annual CPI target band.

Excluding the effects of volatile price movements, StatsNZ said underlying CPI measures increased by 0.6% to 0.7% over the quarter. Over the year, they ranged from 1.3% to 1.7%.

There has been little reaction in financial markets to the report, reflecting the result was largely as expected.

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