(File photo)
Photo: RNZ
Consumer prices rise 0.9 percent in March quarter, annual rate holds at 18 month high of 3.1 percent
Quarterly CPI rise driven petrol, pharmaceutical, confectionary, offsetting cheaper airfares, some groceries
Higher food, electricity, rates, drive annual increase
Middle East conflict likely little influence on inflation, yet
Underlying inflation measures around 2.5 percent, RBNZ expected to eventually raise cash rate
Inflation held steady near 18 month highs as the impacts of the Middle East conflict were yet to be fully felt in prices.
Stats NZ data showed the consumer price index rose 0.9 percent in the three months ended March, with the annual inflation rate unchanged at 3.1 percent.
Higher petrol prices were the biggest, rising 3.5 percent in the quarter, followed by pharmaceutical prices up 17.7 percent, snacks and electricity, which accounted for more than a third of the CPI increase.
“Petrol is the third largest expense item for New Zealand household after rent and construction,” senior manager of prices Nicola Growden said.
A rise in prescription charges drove pharmaceutical prices, while lower airfares to Europe, Australia, and the Pacific accounted for cheaper international airfares, which are generally set as much as 12 months before.
‘Higher than we’d like to see’ – Willis
The Finance Minister said the numbers were “higher than we’d like to see” for New Zealanders who were concerned with the cost of living.
“However, what today’s data does show is that we are entering this conflict with a lower inflation rate than many of the countries we typically compare ourselves to,” Nicola Willis said.
Willis said it was “inevitable” that there were be a higher inflation rate for the next quarter, and there was a range of forecasts.
“What that reflects is that uncertainty about the trajectory and intensity of the conflict in the Middle East, which will have the biggest impact on our inflation rate in the coming quarters.”
Middle East conflict yet to hit
Growden said it was too early for the conflict to have had a material effect on consumer prices.
She said there was no signs of broader price increases caused by fuel, and excluding petrol overall quarterly inflation would have been 0.8 percent higher.
Domestic prices – non-tradables – such as power, rents and rates remained the dominant factors for inflation, rising 1.1 percent for the quarter and by 3.5 percent for the year.
The 12.5 percent rise in electricity prices was the single biggest contributor to the annual increase, followed by an 8.8 percent rise in rates, and then meat and poultry prices rising 8.6 percent for the year.
“Higher electricity prices accounted for more than a tenth of the 3.1 percent annual increase,” Growden said.
The costs of purchasing a new house rose 1 percent for the year, while the 1.2 percent rise in rents was the smallest increase in 16 years.
The price of imported goods and services – tradables – rose 0.7 percent for the quarter and by 3.5 percent for the year.
Among the bigger price falls audio-visual equipment, down 21 percent, along with real estate services.
No RBNZ rate rises – yet
The inflation numbers were at the top end of economists’ expectations.
Various measures of underlying inflation pointed to an annual rate in a range between 2.2 and 2.5 percent.
RBNZ governor Anna Breman recently said it was too early to assess the impact of the conflict on inflation, although it has made a tentative forecast of a 4.2 percent annual rate in the current quarter.
She said the central bank would not be rushed into decisions on rates until it had more data and a better view of whether the inflation boost from the conflict was likely to be short lived or risked becoming entrenched.
Financial markets were betting on probably three rises in the official cash rate to 3 percent this year, starting around the middle of the year.
New Zealand’s inflation rate was lower than Australia, the UK, the US and the OECD’s average of 3.4 percent, but above the 2.1 percent of the European Union.
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