Preview: Consumer Price Index Preview - Q3 2001

Data Flash (New Zealand)

Preview NZ: Consumer Price Index Preview - Q3 2001

(Release: 15 October, 10.45 NZT) 9 October 2001

Deutsche Bank forecast: +0.6% qoq / + 2.4% yoy - balanced risk distribution RBNZ projection in August MPS : +0.6% qoq / +2.4% yoy Previous release (Q1): +0.9% qoq / + 3.2% yoy

Key Points

We expect the CPI to have increased by 0.6% qoq in Q3, leading to a fall of the annual rate of inflation from 3.2% to 2.4%.

The main contributor to the quarterly result is expected to be the food group, with domestic food prices rising on the back of high world prices for agricultural commodities, as well as the low NZD. The annual excise tax increase for alcoholic drinks will make another sizeable contribution, while the rise in the housing group will reflect increased construction costs and local authority rates.

A key negative contribution will be recorded for the transport group, due to a 4% decline in petrol prices.

Our forecast implies a further rise in the various core inflation measures. For example, excluding Fresh Fruit/Vegetables, Petrol, Tobacco Taxes and State House Rentals from the headline CPI, the annual rate of core inflation is expected to rise from 3.0% to 3.2%. Similarly, the median of annual price changes is expected to rise from 2.5% to 3.3%.

Looking ahead to Q4, our preliminary forecast is for a 0.7% qoq increase of the CPI. If our Q3 forecast proves to be correct, that would reduce the annual rate of official CPI inflation to 1.9%. However, the annual measures of core inflation would still record around 2.8%.

Ulf Schoefisch, Chief Economist, New Zealand

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