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

 


NZ inflation edges closer to RBNZ's mid-point

NZ inflation edges closer to RBNZ's mid-point as economy soaks up capacity

July 14 (BusinessDesk) - New Zealand business confidence fell from a 20-year high in the second quarter, based on the Quarterly Survey of Business Opinion, but most economists focussed on signs in the survey that inflation is accelerating.

The consumer price index rose 0.4 percent in the second quarter for an annual pace of 1.8 percent, according to a Reuters survey. The government figures due for release on Wednesday would mark the fastest inflation since the third quarter of 2011, when prices reflected the 2010 hike in good and services tax to 15 percent.

Market consensus for CPI is just ahead of the Reserve Bank on 0.3 percent for the quarter and 1.7 percent annual. The data comes after the QSBO last week showed a net 90.6 percent of respondents expected to increase capacity utilisation, above the long-run average for at least the fifth straight quarter. A net 33 percent of firms surveyed expect to lift prices in the next three months, the second quarter in a row where expectations were above the long-run average.

The net number of firms that saw capacity as a constraint rose to 15.1 percent last quarter, almost twice the long-run average.

As the QSBO showed, "a growing number of firms are saying that they not only intend to raise their prices, but are successfully doing so," Michael Gordon, senior economist at Westpac Banking Corp, said in his CPI preview.

If expectations are met, the Reserve Bank will have no reason not to raise the official cash rate a quarter point to 3.5 percent on July 24, the highest level since December 2008. The central bank tries to keep inflation near the mid-point of its 1 percent-to3 percent target range.

Gordon sees food and electricity prices leading the gains in second-quarter inflation. Food prices rose in each month of the second quarter, while in the electricity industry, grid and network costs are being passed on to consumers and businesses.

Tradable inflation is likely to remain low over the coming year, given the strength of the kiwi dollar, which is set to test its post-float high of 88.42 US cents this week. Economists at ASB say the damping effect of overall inflation from weak tradable inflation "is likely to lessen over 2015 and 2016" as the kiwi dollar falls and retailers fatten their margins.

"There are signs underlying inflation pressures will continue to lift over the coming year," the economists said in a note. "We expect the annual rate of non-tradable inflation will edge up towards 3.7 percent by late 2015 as the NZ economy gains further momentum."

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Finance: Major Campaign To End "Gross Overtaxation Of Savings"

The campaign – which includes a special web site through which New Zealanders can e-mail their own and other MPs and party leaders – is backed by Age Concern, Consumer NZ, the Financial Services Council and the Taxpayers’ Union. More>>

ALSO:

Scoop Business: Leighton-Led WGP To Build, Manage Transmission Gully

The Wellington Gateway Partnership, led by a unit of ASX-listed Leighton Holdings, has won the $1 billion contract to build the Transmission Gully road north of Wellington. More>>

ALSO:

Gareth Morgan: The Government’s Fresh Water Policy – Revisited

Fresh water quality is the latest area to be in the sights of Gareth Morgan and his research organisation The Morgan Foundation... They found that the fresh water policy was a bit murkier than the Environment Minister let on. More>>

ALSO:

Interest Rates: RBNZ Hikes OCR To 3.5%, ‘Period Of Assessment’ Now Needed

Reserve Bank governor Graeme Wheeler raised the official cash rate as expected, while signalling a pause in rate hikes to assess the impact of moves so far this year. The kiwi dollar sank after Wheeler said its strength was “unjustified” and that the currency could have “a significant fall.” More>>

ALSO:

Fonterra: Canpac Site 'Resize' To Focus More On Paediatrics

Fonterra is looking at realigning its packing operations at Canpac, in the Waikato, to focus more on paediatric nutritionals... The proposed changes could mean around 110 roles may not be required at the site which currently employs 330. More>>

ALSO:

Scoop Business: Postie Plus Brand Gets 2nd Chance With Well-Funded Pepkor

The Postie Plus brand is getting a new lease of life after South Africa’s Pepkor bought the failed retailer’s assets out of administration and said it will use its purchasing power to reduce costs of stock and fatten margins. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

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