Quarterly inflation was boosted by alcoholic beverages and tobacco. Photo / file
Quarterly inflation was boosted by alcoholic beverages and tobacco. Photo / file
New Zealand's inflation was finally showing signs of life before it got clobbered by covid-19.
Consumer prices lifted 0.8 per cent during the quarter, bringing annual inflation to 2.5 per cent. That was the highest annual measure since September 2011 when it was 4.6 per cent.
ASB senior economist MarkSmith said that not only was inflation stronger than expected but it probably would have put a rate hike on the table were it not for the coronavirus pandemic.
It had previously cut by 25 basis points in May 2019 and 50 basis points in August 2019 in a bid to jump start long-tepid inflation.
Ben Udy, Australia and New Zealand economist for Capital Economics, said today's data would be "cold comfort to the RBNZ given the virus outbreak may cause inflation to slow below 1 per cent before long."
It is all "ancient history now that we're in the midst of the most significant and synchronised global economic contraction in a generation," said ANZ Bank senior economist Miles Workman.
ANZ expects annual headline inflation to fall to the bottom of the Reserve Bank's 1-3 per cent target band by the end of the year and remain below that level throughout 2021, with only a gradual recovery thereafter. Risks, it said, are skewed to the downside.
ASB's Smith also said covid-19 represents a "massive deflationary shock" which will push headline and core inflation lower for one to two years.
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Stats NZ noted most of the data was collected prior to the lockdown that kicked off on March 25. Only the last week of March required an alternative approach to collect weekly food and fuel prices.
"The CPI is a quarterly measure and not all data is collected weekly. This means that some parts of the CPI may not fully capture covid-related price movements later in the quarter," consumer prices senior manager Paul Pascoe said.
Quarterly inflation was boosted by alcoholic beverages and tobacco, which rose 5 per cent after cigarettes and tobacco prices jumped 11 per cent after the tobacco excise duty increase on January 1.
Food prices rose 2 per cent after grocery food prices lifted 2.1 per cent.
Transport fell 1.7 per cent, influenced by lower prices for passenger transport service, down 6 per cent.
On the annual side, housing and household utilities increased 3.3 per cent, with rentals for housing up 3.7 per cent.
Food prices increased 3.3 per cent, with groceries up 3 per cent.
