Consumer Price Index - June Quarter

Key Points
We expect the CPI to have risen by 1.3% qoq in Q3, lifting the annual rate of inflation from 2.0% to 2.9%.

Given the further rise in petrol prices since early August, we assume that the RBNZ has also increased its estimate from the figure of +1.0% that was originally published in the August Monetary Policy Statement.

Petrol price increases alone are expected to have contributed 0.5% to the CPI increase in Q3. Further key contributors are the increase in tobacco taxes in May, of which only 40% was recorded in the June quarter (estimated contribution: +0.3%); and food prices, due to climatic factors and the influence of the weak NZD and rising world commodity prices on meat and dairy products (estimated contribution: +0.2%).

The only significant downward contribution (-0.1%) is likely to have come from construction costs, reflecting the sharp downturn in residential building activity.

Looking ahead, our current forecast for Q4 is +0.7% qoq, which would lift the annual rate of CPI inflation to 3.4%. The risk distribution around that forecast is biased upwards.

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