{"id":637469,"date":"2026-10-22T00:34:13","date_gmt":"2026-10-22T00:34:13","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/637469\/"},"modified":"2026-10-22T00:34:13","modified_gmt":"2026-10-22T00:34:13","slug":"inflation-rate-falls-to-3-7-for-september-year-but-not-for-long","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/637469\/","title":{"rendered":"Inflation rate falls to 3.7% for September year but not for long"},"content":{"rendered":"
Annual contributors <\/p>\n
Petrol was the largest upward contributor to the September annual inflation rate, up 19.1%.<\/p>\n
\u201cPetrol prices fell in the September 2026 quarter, compared with the June 2026 quarter,\u201d prices and deflators spokeswoman Nicola Growden said.<\/p>\n
\u201cHowever, petrol prices remained higher than in the September 2025 quarter.\u201d<\/p>\n
If petrol prices had not changed, the CPI would have risen 3.2% in the 12 months to the September 2026 quarter.<\/p>\n
Non-tradeable inflation was weaker than expected, which looked to be on account of lower than expected rises in construction costs and local authority rates, ASB senior economist Mark Smith said.<\/p>\n
\u201cThat said, core inflation measures have firmed and are now generally above 3% annually, which is of concern.\u201d<\/p>\n
Other contributors to the annual CPI increase were:<\/p>\n
electricity \u2013 up 9.3%international airfares \u2013 up 12.5%local authority rates and payments \u2013 up 6.2%<\/p>\n
Quarterly inflation<\/p>\n
The CPI rose 0.7% in the September 2026 quarter, compared with the June 2026 quarter.<\/p>\n
Lower petrol prices were the largest downward contributor to the quarterly inflation rate, down 6.5%.<\/p>\n
\u201cPetrol prices fell 6.5% in the September 2026 quarter after rising 20.1% in the June 2026 quarter,\u201d Growden said.<\/p>\n
In the minutes following the release, the New Zealand dollar dropped by about 10 basis points to around US56.95c based on a better-than-expected outcome for non-tradeables inflation.<\/p>\n
\u201cIt reflects the downside surprise to the non-tradeables component, which came in a little bit lower than what people were expecting and even lower than the Reserve Bank was expecting,\u201d ANZ strategist David Croy said.<\/p>\n
The Reserve Bank had forecast non-tradeables to show a 1.3% rise for the quarter. ANZ economists predicted a 1.2% gain, while the actual Stats NZ number showed a 1.0% quarterly increase.<\/p>\n
Capital Economics said the pullback in headline inflation in the quarter would not provide much comfort to the Reserve Bank, given that underlying price pressures continued to build.<\/p>\n
\u201cWe suspect the Reserve Bank will be more concerned about the fact that all three measures of core inflation gathered momentum last quarter,\u201d Capital Economics said.<\/p>\n
\u201cIndeed, inflation excluding food and energy rose from 2.5% to 2.9% in the third quarter.<\/p>\n
\u201cOur base case has been that the Reserve Bank would hike rates by 25 basis points at its meeting ending on October 28, with a final follow-up hike likely in [the first quarter] 2027. That would take the Official Cash Rate to a peak of 3.25%.<\/p>\n
\u201cHowever, with underlying price pressures strengthening, we believe the risks are tilted towards the bank hiking more aggressively than we currently anticipate.\u201d<\/p>\n
Westpac senior economist Satish Ranchhod shared those concerns.<\/p>\n
\u201cWith big swings in fuel costs, and concern that this is spilling over into operating costs more generally, a key focus for the RBNZ is what\u2019s been happening to measures of core inflation,\u201d he said.<\/p>\n
Core inflation smooths through quarter-to-quarter swings in individual prices by excluding volatile items like fuel, food and electricity.<\/p>\n
\u201cOn this front we did see some worrying signs. Several closely watched measures of core inflation have picked up, and now sit at the top of, or slightly above, the RBNZ target band.\u201d<\/p>\n
December quarter<\/p>\n
Despite some heartening topline numbers in this release, the (current) December quarter was \u201cshaping up to be bad\u201d, said KiwiBank economist Alexandra Turcu.<\/p>\n
\u201cWith record high shipping costs for oil into Asia, we will continue to feel the pinch at the pump here in Aotearoa,\u201d she said.<\/p>\n
\u201cThe question remains of whether domestic businesses will raise prices as a result. If the last two quarters tell us anything about that, it\u2019s that they can\u2019t even if they want to.<\/p>\n
\u201cConsumers are spending more on petrol, rates and electricity [among other necessities] and have less to spend on everything else.\u201d<\/p>\n
ASB economists have been forecasting a 4.5% annual inflation rate for the year-end, but say today\u2019s data suggest it could be worse.<\/p>\n
\u201cWe see modest upside risk to our 4.5% end-of-year CPI pick,\u201d ASB\u2019s Smith said.<\/p>\n
\u201cThe 2027 inflation profile also looks to be considerably firmer than September MPS expectations.\u201d<\/p>\n
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.<\/p>\n