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

 

Kiwi inflation is running stronger than expected

Today’s inflation release showed a solid 0.5%qoq gain to end 2019, taking the annual run rate to 1.9%. We had forecast a 0.3%qoq gain (1.7%yoy), and consensus was a touch higher at 0.4% (1.8%). But, more importantly, the print came in slightly above the RBNZ’s conservative 0.2% (1.6%) guesstimate. Food prices fell, as expected, over the quarter.

The lion’s share of the increase in inflation came from transport related costs, including international and domestic airfares, accommodation, and of course petrol. Housing related costs, namely rent, also increased a chunky 0.5% over the last quarter. Tradables inflation bounced from -0.7%yoy to +0.1%yoy. Non-tradables, the domestically generated inflation eased to 3.1%yoy, from 3.2%yoy. The core measures of inflation lifted to 2%, slightly above the headline print of 1.9%, and suggests there’s some inflation in the pipeline.

The RBNZ will take a some comfort in the report, compared to their estimate, and sit comfortably on hold for the time being. But the jury is out on the direction from here. Will inflation hold at the coveted 2% level? Tradables inflation was a key driver of December quarter inflation. But tradables inflation tends to be transitory in nature. Transport price movements, particularly petrol, are among the most fleeting price signals. As we explained in our 2020 outlook note last month, see My delirium: awaiting fiscal support at precisely the right moment in history, we expect inflation to temporarily shoot up to 2% in the first half of 2020, before easing back. From the second half of 2020 we expect only a very gradual rise back to the RBNZ’s 2% inflation target midpoint. And a lot needs to go right for prices to get there.

Inflation is not guaranteed to hold up around the RBNZ’s target midpoint. Combined with ongoing downside risk factors, such as global trade tensions, we maintain our view that the RBNZ will deliver an OCR cut to 0.75% around the middle of the year.


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Maritime Union: Deepening Supply Chain Crisis Requires Action

Maritime Union of New Zealand National Secretary Craig Harrison says the global COVID-19 pandemic exposed pre-existing weaknesses in our logistics sector, and created enormous problems... More>>



Air New Zealand: Employees Recognised With $1,000 Share Award

The efforts Air New Zealand employees made during one of the airline’s toughest years will be recognised via an award of $1,000 worth of company shares to all permanent employees... More>>

Consumer NZ: Bank Complaints On The Rise, Survey Shows

Nearly one in five Kiwis had a problem with their bank in the past year, Consumer NZ’s latest satisfaction survey finds. Consumer NZ chief executive Jon Duffy said the number of bank customers reporting problems had jumped to 18%, up from 11% in 2020... More>>

Mercury: Enters Into Binding Agreements To Acquire Trustpower’s Retail Business

Mercury NZ Limited (Mercury) has announced that it has entered into binding agreements with Trustpower Limited (Trustpower, NZX:TPW) to acquire Trustpower’s retail business for NZ$441 million... More>>

ALSO:


ASB: New Zealanders Missing Out On Hundreds Of Millions In KiwiSaver Government Contributions

New Zealanders have just over a week to ensure they’re eligible for the maximum annual government KiwiSaver contribution... More>>


Stats NZ: GDP Climbs 1.6 Percent In March 2021 Quarter Following December Dip

Gross domestic product (GDP) rose by 1.6 percent in the March 2021 quarter, following a 1.0 percent fall in the December 2020 quarter, Stats NZ said today. "After an easing of economic activity in the December quarter, we’ve seen broad-based growth in the first quarter of 2021... More>>