NZ inflation steady at 0.3% in 2Q, kiwi falls
NZ inflation steady at 0.3% in second quarter, matching RBNZ forecast; kiwi falls
By Jonathan Underhill
July 16 (BusinessDesk) – New Zealand inflation held steady in the second quarter compared to the first-quarter pace as gains in prices of electricity, home rentals and new houses were partly offset by cheaper package holidays, vehicles and liquor. The New Zealand dollar fell.
The consumers price index was unchanged at 0.3 percent, for an annual rate of 1.6 percent, according to Statistics New Zealand. That’s below the 0.4 percent quarterly and 1.8 percent annual pace forecast in a Reuters survey and broadly in line with the central bank’s expectations. The currency dropped to 87.25 US cents from 87.65 cents immediately before the release.
The data suggests the Reserve Bank won’t be deterred from raising the official cash rate to 3.5 percent at its July 24 review to restrain inflation it sees rising to a 2.1 percent annual rate in June next year, breaching the mid-point of its 1 percent-to-3 percent target. Electricity prices have been rising as network operators pass on the costs of upgrading their lines.
“Growing momentum in New Zealand economic activity should flow through to a lift in underlying inflation over 2015 and 2016,” economists at ASB said before the data was released. “Added to that will be the likely lessening dampening effects of the high New Zealand dollar on tradable inflation.”
The tradable component of CPI rose 0.2 percent in the second quarter, half the rate of the non-tradable component, which rose 0.4 percent. In the year, tradable inflation was 0.1 percent, the first gain since March 2012, while non-tradable inflation was 2.7 percent.
The trimmed mean measures, which exclude extreme price movements to show ‘underlying’ price changes, were 0.2 percent in the second quarter.
Prices for housing and household utilities rose 1.2 percent in the latest quarter, the biggest upward contribution to the CPI, as electricity prices rose 4.2 percent, housing rents gained 0.6 percent and newly built houses excluding land rose 1.2 percent.
The government statistician said the gain for housing and household utilities was the largest since a 1.6 percent gain in the fourth quarter of 2010. On an annual basis it was up 3.4 percent.
Food prices rose 0.9 percent in the quarter, driven by a 13 percent jump in vegetables and a 2.5 percent gain for milk, cheese and eggs. Food prices rose 1.6 percent in the year.
Package holiday prices fell 6.5 percent in the quarter, likely influenced by the buying power of a high kiwi dollar. Fruit fell 4.9 percent, vehicle purchases declined 1.2 percent and alcoholic beverages dropped 0.7 percent.
Among other groups, household contents and services gained 1.1 percent in the quarter, health was up 0.2 percent, education gained 0.4 percent and clothing and footwear was up 0.1 percent. Recreation and culture dropped 1.1 percent, transport was down 0.3 percent, and communication fell 0.9 percent.
Six of the 11 groups measured rose and five fell.
The inflation data comes after the Quarterly Survey of Business Opinion showed 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.