Inflation rise lower than expected

The consumers price index (CPI) rose 0.4 per cent in the March quarter, as petrol prices went up 6.9 per cent, fresh milk lifted 6 per cent, and university fees gained 6.1 per cent.

The latest increase, which followed a 0.2 per cent fall in the December quarter, means the annual rate stayed at 2 per cent.

The most significant rises in the year to March were an 11.5 per cent rise in petrol prices and a 9.9 per cent rise in second-hand car prices.

Publishing the data today, Statistics New Zealand (SNZ) said the main price falls in the latest quarter were an 8.3 per cent decline in international air transport, and a 7.6 per cent decrease in audio-visual equipment. For the year audio-visual equipment prices fell 18.6 per cent.

The March quarter rise was lower than expected, with the median in a Reuters poll of economists having been for a quarterly increase of 0.6 per cent.

The CPI data suggested the Reserve Bank won't need to be in any hurry to raise interest rates.

Overall prices in the CPI food group rose 1 per cent in the March quarter, following a 2.4 per cent fall three months earlier.

Grocery food prices gained 1.1 per cent, with cheese up 7.3 per cent and butter up 19.7 per cent, along with the 6 per cent rise in fresh milk prices.

Fruit prices were up 5.8 per cent, mainly due to a 53.1 per cent rise in prices for kiwifruit, where prices typically peak in March when kiwifruit is in short supply.

A 1.2 per cent rise in prices in the food group for the year to March was the lowest annual rise in the food group since the year to June 2005, SNZ said. Despite the small rise in the past year, food prices are 10.1 per cent higher than two years ago.

Petrol prices in the March quarter reached their highest level since September 2008, having risen throughout the latest quarter and being about 5 per cent higher in the March month than in the January month.

Had petrol prices been unchanged from the December quarter, the CPI would have remained unchanged in the March quarter, SNZ said.

The 8.3 per cent fall in international air transport prices in the March quarter meant prices were 0.7 per cent lower than a year ago and 6.4 per cent lower than two years ago. Domestic air transport prices fell 8.7 per cent for the year to March.

A 4.8 per cent rise in the overall education group in the March quarter was the largest quarterly increase in a decade, with the 6.1 per cent rise in university fees reflecting higher course fees and new compulsory levies introduced by some universities to cover the costs of providing existing services to students, SNZ said.

A 3.2 per cent rise in primary and secondary education fees was the smallest March increase in eight years.

Furniture and furnishings prices fell 3.3 per cent in the latest quarter, and household appliances fell 1.6 per cent, while the clothing and footwear group was down 1.2 per cent.

In the March quarter, the tradable component of the CPI increased 0.1 per cent, while the non-tradable component rose 0.5 per cent.

Tradables are goods and services that are imported or in competition with foreign goods, while non-tradables are goods and services that face no foreign competition.

In the year to March, non-tradables were up 2.1 per cent, the lowest annual rise since the year to December 2001. That reflected relatively low annual rises for electricity, rentals for housing, the purchase of new housing, and property maintenance services, SNZ said.

The tradable component was up 2 per cent in the year.

Separately, the food price index, also published today, showed a 0.2 per cent rise in food prices in March from February. Porterhouse and sirloin steak prices lifted 17.7 per cent after extensive discounting in February, fresh chicken lifted 5 per cent, and lettuce was up 21.2 per cent, while apples fell 19.6 per cent, plain biscuits were down 12.3 per cent, and margarine decreased 10.9 per cent.

In the year to March the food price index was up 0.3 per cent, the smallest annual rise since the year to July 2004.

- NZPA