NZ: June quarter CPI flat, annual inflation slows to 1.7% - Westpac

The New Zealand’s consumer Price Index (CPI) was unchanged in the June quarter, taking the annual inflation rate down from 2.2% to 1.7%, notes Michael Gordon, Acting Chief Economist at Westpac.

Key Quotes

“Groceries, fuel and domestic airfares were softer this quarter, and the rising New Zealand dollar continued to suppress imported goods prices.”

“Measures of underlying inflation retreated a little this quarter, though they have come off their lows since 2015.”

“This overstates the degree to which inflation has slowed, as it includes volatile items such as fuel prices. But a range of measures of underlying inflation also saw some slowdown.”

“Today’s result was slightly below our forecast of a 0.1% rise for the quarter, and substantially below the Reserve Bank’s forecast of a 0.3% rise. The RBNZ has been emphasising lately that it expects inflation to be volatile for a while as one-off price changes work their way through, and was already forecasting inflation to (temporarily) drop back towards the bottom end of its 1-3% target range by early next year. So today’s figures were at least in the spirit of the RBNZ’s views.”

“The result was even softer than the market and the Reserve Bank expected, and will only reinforce the RBNZ’s view that Official Cash Rate hikes are a long way off.”