NZ inflation missing in action in second quarter

NZ inflation missing in action in second quarter; kiwi
dollar drops

By Rebecca Howard

July 18 (BusinessDesk) –
New Zealand consumer prices were unchanged in the second
quarter as weaker fuel prices offset rises in household
basics like rent, food and electricity.

The kiwi dollar
dropped to 72.61 US cents after the figures were released
from 73.26 cents immediately before. It fell to 93.18
Australian cents from 93.88 cents and the trade-weighted
index declined to 77.33 from 77.96.

The consumers price
index was unchanged in the three months to June 30 while
annual inflation was 1.7 percent, Statistics New Zealand

Economists had expected inflation of 0.2 percent in
the second quarter, for an annual rate of 1.9 percent,
according to the median in a poll of 15 economists surveyed
by Bloomberg. The data also undershot the central bank’s
forecasts for inflation of 0.3 percent in the second quarter
for an annual rise of 2.1 percent.

Second quarter
inflation eased back from the first quarter when it was 1
percent and the annual rate was 2.2 percent.

The Reserve
Bank is mandated with keeping annual inflation between 1 and
3 percent, with a focus on the mid-point. At the June rate
review, Reserve Bank governor Graeme Wheeler kept the
official cash rate at 1.75 percent and said the bank viewed
a recent pickup in inflation as a temporary spike in the
tradables sector.

“The increase in headline inflation in
the March quarter was mainly due to higher tradables
inflation, particularly petrol and food prices,” Wheeler
said in a statement at the time. “These effects are
temporary and may lead to some variability in headline

Today’s data will likely add to that view
and quell any expectations that the central bank might soon
join others – like the Bank of Canada – that have lifted
or are expected to lift rates soon.

The central bank’s
forecasts show it does not expect rates to lift until
September 2019 at the earliest.

Petrol prices fell 1.9
percent on the quarter and were up 4.5 percent on the year.
The average price of 1 litre of 91 octane petrol was $1.86
in the June quarter, down from $1.90 in the March quarter
but up from $1.78 in the June quarter a year

Overall the transport sector – which includes
fuel and other services such as airfares – fell 1.3
percent on quarter and showed an annual rise of 1.2 percent.
Domestic airfares were down 14.5 percent on the quarter
while international air transport rose 3.7 percent.

slide was offset by a 0.7 percent rise in food prices on the
quarter, with vegetable prices jumping 19 percent,
reflecting poor weather and growing conditions. Dairy prices
were also up, with prices for butter reaching their highest
price since the series began, Stats NZ

Housing-related prices continued to increase, up 0.8
percent on the quarter and 3.1 percent on the year. Prices
for new housing rose 1.8 percent in the June quarter for an
annual increase of 6.4 percent. Rental prices rose 0.4
percent on the quarter and 2.1 percent on the year.

body rates eased 0.1 percent on the quarter and were up 3.2
percent on the year while refuse disposal and recycling fell
1.3 percent on the quarter but rose 4.5 percent on the year.
Household energy, which includes electricity, gas and solid
fuels rose 1.5 percent on the quarter and 1.8 percent on the

The tradables consumers price index, which
includes goods and services that compete with international
rivals, fell 0.2 percent in the quarter but rose 0.9 percent
on the year. Non-tradables inflation, which focuses on
domestic inflation, rose 0.2 percent on the quarter and was
up 2.4 percent on the year. Prices for the purchase of
newly built houses, excluding land, made the most
significant upwards contribution to the annual


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