New Zealand inflationary pressures remain incredibly weak.
According to data released by Statistics New Zealand (StatsNZ), consumer price inflation (CPI) grew by a paltry 0.1% in the December quarter of last year, a result that was well below the 0.4% increase that had been expected by the markets.
It was also a sharp deceleration on the 0.5% increase recorded in the September quarter.
“Higher petrol prices, air fares, and housing-related costs were countered by lower prices for vegetables, new cars, and a range of household goods,” said StatsNZ in a statement.
The agency said petrol prices rose by 6.1% over the quarter, outpaced by an 11% increase in airfares.
“Petrol prices were up in the December quarter, following two quarters of falls,” said Jason Attewell, prices senior manager at StatsNZ. “Rising oil prices and a falling exchange rate pushed prices up sharply between July and November this year.”
StatsNZ said housing and household-related prices were also a large contributor to inflation during the quarter.
Construction prices rose by 1.3%, leaving them up 5.3% on a year earlier. Rental costs increased by a smaller 0.2%. Over the year, they rose by 2.3%.
Helping to offset those gains, prices for food and household goods both fell during the quarter.
“Food prices fell 1.7% in the quarter, influenced by seasonally lower vegetable prices,” said Attewell. “Prices fell for tomatoes, lettuce, and other salad foods.”
Household contents and services prices also declined, falling 1.5% from the September quarter. Prices for major household appliances slid by 2.8% while those clothing prices by a larger 1.8%.
StatsNZ said underlying inflationary pressures, while weak, were slightly higher than the headline CPI increase.
“The trimmed-mean measures — which exclude extreme price movements — ranged from 1.4% to 1.8% for the year,” it said. “On a quarterly basis, trimmed means ranged from 0.2% to 0.3%, which is higher than the 0.1% percent overall rise in CPI.
With the headline CPI figure undershooting for the quarter, the year-on-year rate slowed from 1.9% to 1.6%, below the Reserve Bank of New Zealand’s 2% inflation target midpoint.
Markets had been expecting an unchanged reading of 1.9%.
Tradable prices — which are largely influenced by global factors — increased by 0.5% over the year with higher prices for petrol, dairy products and fruit partially offset by lower new car prices.
Non-tradable prices — largely driven by domestic influences — increased by 2.5% over the same period.
“Higher prices for cigarettes and tobacco, construction, and rents made the major contributions,” StatsNZ said. “Better value telecommunication services partly offset this increase, with more data on offer for consumers on their mobile devices.”
The New Zealand dollar has fallen heavily on the soft report, dropping a full cent from the highs seen earlier in the session.
Currently, the NZD/USD trades at .7341.