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NZ inflation rises 0.3 percent in June quarter

Fuseworks Media
Fuseworks Media

Wellington, July 16 NZPA - The consumer price index (CPI) rose a smaller than expected 0.3 percent in the June quarter, giving an annual rate of 1.8 percent.

Publishing the data today, Statistics New Zealand (SNZ) said the most significant rises during the latest quarter were an 8.7 percent increase in the price of cigarettes and tobacco, a 1.4 percent rise in petrol, and a 2.4 percent rise in second hand cars.

Had cigarette and tobacco prices remained unchanged from March, the CPI would have risen by just 0.1 percent, SNZ said.

The most significant decline in the quarter was a 4.6 percent fall in the price of audio-visual and computing equipment.

Food prices fell 0.9 percent in the June quarter. Had they remained unchanged from May, the CPI would have risen 0.5 percent.

In the annual rise, the main factors included a 9.5 percent rise in petrol prices, a 16.1 percent lift in international air fares, and a 9.3 percent rise in cigarettes and tobacco, while audio-visual and computing equipment prices fell 17.5 percent.

The annual rise in international air prices was the largest annual increase since 1983, and followed a 30-year low in June last year.

The latest figures follow a 0.4 percent rise in the March quarter, when the CPI annual rate rose 2 percent.

The June quarter CPI rise was below expectations, with the median prediction in a Reuters poll of economists having been for a 0.5 percent rise.

The New Zealand dollar tumbled after the data was released at 10.45am, falling from around US72.70c to around US72.30c within 40 minutes.

SNZ said cigarette and tobacco prices in the June quarter were affected by a 10 percent rise in excise on cigarettes at the end of April, while excise on tobacco rose 25.4 percent.

The June quarter rise in cigarette and tobacco prices was the largest quarterly rise in a decade.

For the year, second-hand cars rose 7.7 percent, local authority rates and payments rose 5.9 percent, and rentals for housing rose 1.4 percent. Fruit and vegetable prices fell 6.3 percent over the year, while the meat, poultry and fish group fell 3.6 percent.

The non-tradable component of the CPI -- goods and services that face no foreign competition -- rose 0.6 percent in the June quarter and 2.2 percent for the year.

The tradable component, which is in competition with foreign goods, fell 0.1 percent in the quarter and rose 1.1 percent for the year to June.

ANZ senior economist Khoon Goh expected the June quarter data to be the last "subdued" CPI figure, to be followed by some "chunky" figures during the next few quarters due to government policy changes.

The June figures did give the Reserve Bank a better starting point, and given signs of economic growth easing in the near term, he expected the Reserve Bank to raise interest rates this month and possibly September, but to then pause.

But UBS senior economist Robin Clements said the rise in non-tradables inflation was above the Reserve Bank's forecast.

The market had jumped to the conclusion that because the CPI was lower than expected that the Reserve Bank was more likely to not only gradually lift interest rates, but also to pause somewhere along the line. But he was not sure it was that clear cut.

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