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Electricity price rise shown in latest inflation data

Electricity price rise shown in latest inflation data

First published in Energy and Environment on April 18, 2019.

Mixed performance for energy prices in the latest Consumer Price Index was a major driver of inflation with electricity prices increasing 1.3% in the March quarter.

While much of the economic analysis focused on overall tepid inflation and what it might mean for interest rates, many politicians and officials will be noting that one of the major increases in inflation was for electricity prices.

The CPI rose 0.1% in the March quarter bringing the annual rate of inflation to 1.5%, down from a 1.9% pace in December, Stats NZ said.

Within the housing sector, housing and household utilities prices lifted 0.6% on the quarter and 3% on the year. The lift in the housing and household utilities was the main driver behind the 1.5% annual inflation rate, Stats NZ said.

Actual rentals for housing rose 0.6% in the quarter and were 2.4% higher for the year. Household energy prices, which include electricity, gas and solid fuels, rose 1.2% on the quarter and 2.7% on the year.

Electricity prices rose by 1.3% in the March quarter, which is ahead of the usual time for price increases in April. Gas prices increased by 0.2% and there was no change in solid fuels.

Other energy prices had the opposite effect on inflation because of falls in the prices of petrol. The price of petrol fell 7% from the December 2018 quarter. The average price of 91 octane, after discounts (for the entire March quarter), was $2.01 a litre.

Lower petrol prices in January and February contributed to an overall lower average price for the quarter. However, by the last week of March, the petrol pump price was 3.7% higher than the March quarter average and prices continued to rise in the first half of April. Petrol prices fell 7.7% in the North Island excluding Auckland and Wellington, and 7.1% in Auckland, in the March 2019 quarter. This compared with 6.0% falls in both Wellington and the South Island.

March-quarter petrol prices were up 0.7% from a year earlier.

Stats NZ also noted the trimmed-mean measures, which exclude extreme price movements by progressively removing the influence of the largest increases and decreases, ranged from 1.7% to 1.9% for the year. This indicates underlying inflation is higher than the 1.5% overall increase in the CPI.

First published in Energy and Environment on April 18, 2019.

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