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Home / Business

Inflation hits Kiwi pockets with prices rising 0.9 pct in last three months

NZ Herald
15 Oct, 2018 08:00 PM3 mins to read

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NZ consumer prices rose almost a percent in the September quarter. Photo/Getty Images.

NZ consumer prices rose almost a percent in the September quarter. Photo/Getty Images.

Higher-than-expected third-quarter inflation is unlikely to take rate cuts off the table as it was largely driven by higher petrol prices, something the Reserve Bank has said it will look through.

The consumers price index rose 0.9 per cent in the three months ended Sept. 30 while annual inflation was 1.9 per cent, Statistics New Zealand said.

Economists had been expecting the consumers price index would increase 0.7 per cent in the three months ended Sept. 30, for an annual increase of 1.7 per cent, according to the median in a poll of 14 economists surveyed by Bloomberg.

The Reserve Bank had tipped a quarterly rise of 0.4 per cent and an annual increase of 1.4 per cent.

The New Zealand dollar jumped almost half a US cent and was recently at 65.90 US cents
The central bank is mandated with keeping annual inflation between 1-and-3 per cent over the medium term, focusing on the mid-point. Stubbornly weak inflation has kept interest rates on hold at a record low 1.75 per cent and in September governor Adrian Orr reiterated the next move could be down if the economy fails to fire.

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He also noted the impact higher fuel prices would have on near-term inflation, but said the central bank would "look through this volatility as appropriate." It still expects consumer price inflation to "gradually rise" to the 2 per cent annual target.

Petrol prices rose 5.5 percent in the September quarter and were up 19 percent on the year, the highest annual increase since June 2011.

Stats NZ said that "multiple factors" contributed to the rise including the weaker New Zealand dollar, a lift in crude oil prices and a regional fuel tax introduced in Auckland, where petrol prices increased 8.8 percent over the quarter.

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If petrol is stripped out, the increase was 0.7 percent for the September quarter and 1.2 percent for the September year.

"While petrol only makes up about 4 percent of the CPI, it can have a large impact on overall inflation," prices senior manager Paul Pascoe said.

Inflation was also boosted by higher housing-related costs. Housing and household utilities lifted 1.1 percent versus the June quarter and 3.1 percent on the year. Local authority rates and payments were up 5.1 percent on the quarter and on the year.

While local authority rates increase in the September quarter each year "the rise this year is higher than the 4.2 percent average increase we have seen over the last five years," Pascoe said.

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Insurance premiums also rose with dwelling insurance up 4.4 percent on the quarter and 16 percent on the year. Contents insurance was up 1.1. percent on the quarter and 4.3 percent on the year.

Rentals for housing rose 0.4 percent in the quarter and were 2.3 percent higher for the year. Household energy prices, which includes electricity, gas and solid fuels, eased 0.1 percent on the quarter and were up 2.4 percent on the year.

Prices for the purchase of newly-built homes lifted 1.3 percent on the quarter and were up 4.1 percent on the year.

Food prices, meanwhile, lifted 0.6 percent in the quarter and 0.2 percent on the year.

The tradables CPI, which includes goods and services that compete with international rivals, rose 0.9 percent in the quarter and was up 0.8 percent on the year. Non-tradables inflation, which focuses on domestic goods and services, rose a quarterly 0.8 percent for a 2.6 percent annual increase.

- BusinessDesk

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