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CPI Rises 0.6 Percent

CPI Rises 0.6 Percent

The Consumers Price Index (CPI) rose by 0.6 percent in the December 2002 quarter, according to Statistics New Zealand. This follows an increase of 0.5 percent in the September 2002 quarter.

The increase of 0.6 percent in the December 2002 quarter mainly reflects higher prices for housing and transportation.

Housing prices rose by 1.4 percent, driven by increases in the purchase and construction of new dwellings (up 1.8 percent). Builders surveyed have attributed these rises to a range of reasons that include higher prices for materials, increased rates charged by subcontractors and higher costs for labour and fittings. In some instances, builders have reported a change to higher specification framing timber or cladding systems, and in line with the CPI objective of measuring only price changes, adjustments have been made to remove the impact of these 'quality' changes. Less significant upward contributions to the increase in housing came from price rises for rents (up 0.6 percent) and local authority rates (up 1.7 percent).

A 1.4 percent rise in transportation prices made the next most significant contribution to the increase in the CPI in the December 2002 quarter. This increase was mainly due to a 10.0 percent price rise for international air travel. The last two December quarters have recorded increases of approximately 6 percent in the price of international air travel, suggesting a possible impact of seasonal factors. The higher (10.0 percent) increase recorded this quarter has been due to higher rates for particular routes, rather than 'across the board' increases. Partly offsetting the rise in international air travel was a fall in prices for domestic air travel (down 9.0 percent), which is mainly due to airfare reductions that took effect from 1 November 2002. Adjustments were made to exclude the effect on the price index of service changes such as the loss of meals.

Personal and health care prices increased by 0.7 percent in the December 2002 quarter and were mainly driven by higher prices for medical and health services. Less significant upward contributions to the overall rise in the CPI came from price rises for recreation and education (up 0.6 percent) and tobacco and alcohol (up 0.4 percent).

The household operation group showed no overall change in the December 2002 quarter, though there were significant price movements within the group. Price rises were recorded for household contents insurance (up 3.3 percent) and electricity (up 1.1 percent). Offsetting these increases were lower prices for household appliances and equipment (down 3.1 percent). This is the largest quarterly decrease in appliances and equipment prices since 1982. Analysis of price movements this quarter suggests the fall can be attributed to a mix of factors, including the rising value of the New Zealand dollar, increased product competition and falling prices for 'new' goods such as DVD players.

On an annual basis, the CPI is 2.7 percent higher than a year earlier.

Brian Pink

Government Statistician

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