Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ inflation probably accelerated in first quarter

NZ inflation probably accelerated in first quarter, keeping OCR hikes on track

By Jonathan Underhill

April 14 (BusinessDesk) – New Zealand inflation probably accelerated in the first quarter, keeping on track expectations that the Reserve Bank will lift the official cash rate again next week to mitigate the effects of strong demand growth in coming years.

The consumers price index rose 0.5 percent in the first quarter, for an annual rate of 1.7 percent, according to a Reuters survey and the central bank’s latest estimate. That would mark the fastest annual rate since the fourth quarter of 2011.

Reserve Bank governor Graeme Wheeler raised the OCR to 2.75 percent last month, heralding the start of a tightening cycle with the first hike since 2010, and is expected to lift the rate to 3 percent next week. The rate of inflation and the bank’s policy response will depend on the behaviour of households and businesses in an economy where construction activity and migration flows are growing, and where loan restrictions have yet to conclusively show up in cooling house prices.

The Reserve Bank expects annual inflation to reach 2 percent this quarter, the mid-point of its target range, before creeping higher by the final three months of 2015. Some bank economists see a faster pace of inflation, given what is seen as a broad-based economic recovery.

The BNZ-BusinessNZ Performance of Composite Index, which combines the manufacturing and services indexes, jumped 5.1 points to 58.4 in March. Taken together with growth in building consents that suggests “upward pressure on inflation, given current limited spare capacity,” Bank of New Zealand economist Doug Steel said.

All of the acceleration in inflation is coming from the non-tradable sector of the economy, including housing related costs and a 10 percent hike in the tobacco excise. ASB chief economist Nick Tuffley expects non-tradable inflation of 1.3 percent in the first quarter, more than offsetting a 0.3 percent decline in tradable inflation in the face of a strong kiwi dollar.

The NZIER’s March 2014 Quarterly Survey of Business Opinion, released last week, showed that a net 37 percent of those polled expect average selling prices to rise in this quarter. That’s the highest since the second quarter of 2010, when it reached 40 percent, and is above the long-run average of 32 percent.

“Inflation turned a corner last year, and is now increasingly back in focus given signs of capacity pressures,” Tuffley said in a preview of the inflation data. He expects annual inflation to peak at 2.5 percent in 2015, above the Reserve Bank’s track, partly on expectations the New Zealand dollar will weaken in coming years, ending the mitigating influence from tradable deflation.

The trade-weighted index was recently at 80.45, well above the 78.4 level the central bank is expecting it to average in the first half of 2014, according to last month’s monetary policy statement. The Reserve Bank has the TWI reducing to 76.6 by the first quarter of 2016.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

R18: The Warehouse Group Praised For Removing Games

The decision by New Zealand’s largest retailer The Warehouse Group (TW Group), to withdraw stocks of the latest version of Grand Theft Auto V (GTA V) and other R18 games, has been praised by advocacy group Stop Demand Foundation. More>>

ALSO:

Air NZ Wine Awards: Victory For Villa Maria As Pinot Noir Thrills

It was a night to remember as Villa Maria Estate picked up one of the highest accolades of the evening, the O-I New Zealand Reserve Wine of the Show Trophy, at the 28th Air New Zealand Wine Awards. The Villa Maria Single Vineyard Southern Clays Marlborough ... More>>

ALSO:

Future Brighter Money: RBNZ Releases New Bank Note Designs

New Zealand’s banknotes are getting brighter and better, with the Reserve Bank today unveiling more vibrant and secure banknote designs which will progressively enter circulation later next year. More>>

ALSO:

Commerce: Supermarket Inquiry Finds No Breaches By Countdown

The Commerce Commission inquiry into anti-competitive behaviour by Countdown supermarkets, alleged by former Labour Party MP Shane Jones, has found nothing to warrant prosecution, although it warns supermarkets to take care in the way they communicate... More>>

ALSO:

Crown Accounts: English Flags ‘Challenge’ To Budget Surplus

Finance Minister Bill English is warning next month’s half yearly fiscal and economic update from the Treasury may not forecast a budget surplus, saying that returning the government’s accounts to surplus in 2015 will be “a challenge”, given the decline in commodity prices and weak global inflation. More>>

ALSO:

March 2015: Netflix To Launch In Australia And New Zealand

World’s Leading Internet Television Network to Offer Original Series, Movies, Documentaries, Stand-Up Comedy Specials and TV Shows for Low Monthly Price More>>

ALSO:

Price Of Cheese (Is Up): Dairy Product Prices Fall To Five-Year Low

Dairy product prices fell in the latest GlobalDairyTrade auction to the lowest level in more than five years, led by declines in rennet casein and skim milk powder. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news