Construction Prices Drive CPI Increase

Construction Prices Drive CPI Increase

The Consumers Price Index (CPI) increased by 0.7 percent in the December 2003 quarter, according to Statistics New Zealand. The housing group continues to make the most significant upward contribution to the CPI, with prices rising by 2.2 percent. The increase in the December quarter also reflects higher prices for electricity and international air travel. These increases were partly offset by lower petrol prices.

The rise in the housing group in the December 2003 quarter was mainly due to higher prices for the purchase and construction of new dwellings, which increased by 3.3 percent. Construction prices have increased for 19 consecutive quarters and the annual increase of 8.5 percent is the largest since the June 1995 quarter.

Sixty-one percent of surveyed construction prices rose in the December 2003 quarter compared with 44 percent in the September quarter. The main reasons cited for increases in the December 2003 quarter were rising labour costs, higher prices for construction components, increased subcontractors' charges and rises in the cost of fittings.

Household operation costs rose by 0.7 percent in the December 2003 quarter, mainly due to an increase of 3.8 percent in electricity prices. The latest rise in electricity prices follows an increase of 3.2 percent in the September 2003 quarter. Electricity prices are now 9.3 percent higher than a year ago, due to widespread tariff increases. Partly offsetting the rises in the December 2003 quarter was a 1.7 percent fall in prices of household appliances and equipment. Alcohol prices rose by 0.6 percent in the December 2003 quarter, reflecting higher prices for spirits and liqueurs, beer and wine.

Transportation prices remained unchanged in the December 2003 quarter. A 3.2 percent rise in international air travel prices was offset by falls in petrol prices of 2.1 percent and used car prices of 0.7 percent.

On an annual basis, the CPI increased by 1.6 percent. The most significant contribution to the annual change came from an 8.5 percent rise in prices for the purchase and construction of new dwellings.

Brian Pink

Government Statistician

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