The red-hot property market helped drive the Consumer Price Index (CPI) to a higher than expected increase for the December quarter, Statistics New Zealand figures show.
The CPI increased 0.7 per cent for December quarter, up on economists' predictions of a median 0.5 per cent increase over the same period. In
the September quarter the CPI increased 0.5 per cent.
On an annual basis, the CPI increased 1.6 per cent, higher than the median 1.3 per cent increase forecast by economists and the 1.5 per cent rise for the September year.
The Reserve Bank of New Zealand had forecast a 0.4 per cent CPI increase in the December quarter, and a 1.2 per cent increase for the year.
UBS NZ chief economist Robin Clements said the annual CPI of 1.6 per cent was still in the lower part of the target range, while the quarterly figure was higher than expected.
"... so on the basis of that you'd say increasing the risk of a tightening (the official cash rate) later this month, although I think it's a bit premature to jump to that conclusion.
Goldman Sachs JB Were economist Bernard Doyle said the figures were surprising.
"The key message here is it's probably premature to write off a (official cash) rate hike next week -- just having a quick look at the sources of where the surprise came from, new dwelling costs have risen very sharply and that's a classic sign of capacity pressure in the economy.
"The Reserve Bank will probably be taking that on board," Mr Doyle said.
The cash rate is at 5.0 per cent, and the Reserve Bank is due to review it on January 29.
Meanwhile, government statistician Brian Pink said the CPI's housing component in the fourth quarter of last year continued to "make the most significant upward contribution to the CPI".
Housing prices rose by 2.2 per cent in the December quarter, which reflected a 3.3 per cent hike in the prices of building and buying new houses.
Construction prices had now increased for 19 consecutive quarters and the annual increase of 8.5 per cent was largest since the June 1995 quarter.
Sixty-one per cent of survey construction prices rose in the three months to December 31, compared with 44 per cent in the September quarter, Mr Pink said.
"The main reasons cited for increased in the December 2003 quarter were rising labour costs, higher prices for construction components, increased subcontractors' charges and rises in the cost of fittings," Mr Pink said.
Local authority rates and rents were also up.
However, the CPI's move higher was also helped by higher prices for electricity, which were up for the eighth straight quarter.
A 3.8 per cent rise in electricity prices in the December quarter eclipsed the 3.2 per cent hike in the proceeding three month period.
"Electricity prices are now 9.3 per cent higher than a year ago, due to widespread tariff increases," Mr Pink said.
Overall, household operation costs increased 0.7 per cent.
Alcohol prices jumped 0.6 per cent in the December quarter as a result of higher prices for spirits, liqueurs, beer and wine.
Transportation prices remained unchanged, while there was a 3.2 per cent spike in the price of international air travel.
"These increases were partly offset by lower petrol prices," Mr Pink said.
Statistics NZ also released the monthly food price index today, which showed food prices fell 0.4 per cent in December.
"Price decreases were recorded for grocery food, soft drinks and confectionery; and meat, fish and poultry," Mr Pink said.
"These decreases were partly offset by higher prices for fruit and vegetables; and restaurant meals and ready-to-eat food," he said.
- NZPA
The red-hot property market helped drive the Consumer Price Index (CPI) to a higher than expected increase for the December quarter, Statistics New Zealand figures show.
The CPI increased 0.7 per cent for December quarter, up on economists' predictions of a median 0.5 per cent increase over the same period. In
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