Consumer price inflation

Higher petrol and grocery prices helped push annual consumer price inflation up to 3.4% in the March quarter, data from Statistics New Zealand shows. Inflation in the March quarter from the December quarter of 0.7% was in line with market economist expectations.

The New Zealand dollar dipped shortly after the news as the figure was less than some traders had priced in, leading them to believe that an official interest rate cut is slightly more likely. However, these figures are unlikely to change the Reserve Bank’s current view that the official interest rate needs to remain on hold at 8.25% because inflation is forecast to remain above the bank’s 1-3% target band in the next year or two as the government introduces a carbon emissions trading scheme and cuts personal taxes.

The figures paint a picture of an economy grinding along under the weight of higher oil and food prices linked to the global boom in commodity prices, but they also show domestically sourced inflation from government fees and charges, housing costs and rents is boosting the inflation outlook. Lower prices for imported electronics and lower international travel costs almost completely offset the increase in petrol and imported food costs, meaning tradeables inflation in the quarter was just 0.2% and tradeables inflation for the year was 3.4%.

Non-tradeables inflation, which includes building costs, local services costs and government charges costs, rose 1.1% in the quarter and was up 3.5% for the year. Total inflation for the year of 3.4% was up from 3.2% in the December quarter and the second highest since inflation blipped up to 4% in mid 2006.

Big movers in the quarter included;

* Grocery food costs, which rose 3.6% in the quarter and are up 8.7% for the year,

* Non alcoholic beverages such as coffee and water, which rose 3.3% for the quarter and are up 4.9% for the year,

* Cigarettes and tobacco, which rose 3.4% for the quarter and are up 3.7% for the year,

* Footwear costs, which fell 1.8% and are down 1.2% for the year,

* Rentals, which rose 1.2% for the quarter and are up 3% for the year,

* Property rates, which are up 0.2% in the quarter and are up 7.1% for the year,

* Package holiday costs, which fell 5.2% in the quarter and are up just 1.3% for the year,

* Audio visual equipment and computers, which fell 3.6% for the quarter and are down 15% for the year, Central and local government charges rose 0.9% for the quarter and are up 2.5% from a year ago.

Early childhood education costs have fallen 34.7% from a year ago, largely due to the introduction of 20 hours of free child care a week.

Although primary and secondary eduction costs rose 5.7% for the quarter and are up 5.7% for the year.

Elsewhere, food price inflation data for March shows prices rose 0.7% in March and are up 6% from a year ago.

Vegetable prices rose 7%, in large part due to a 79.9% increase in the price of tomatoes.  http://www.interest.co.nz

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