NZ CPI: Strong headline numbers but mixed detail - ANZ

The research team at ANZ explains that NZ’s headline inflation rose by more than expected in Q1, with one-offs leading the way and some core measures (trimmed mean and weighted median back above 2%) also lifting.

Key Quotes

“The details were far more mixed (while admittedly stronger than we had expected), with inflation outside of one-offs and housing far more tame. Inflation excluding food, petrol and energy was stable at 1.6% y/y.” 

“Core and underlying measures of inflation are grinding higher, but only modestly so.”

“We expect the RBNZ’s sectoral factor model to show a slight tick up from 1.5% to 1.6%.”

“With the economy increasingly butting up against capacity pressures, we do expect domestic inflation pressures to broaden further beyond housing and into the labour market.”

“However, there is still only modest evidence of this occurring at this stage (although the latest equal pay ruling should add some impetus). And with the impact of food and petrol price gains set to be temporary, and plenty of questions surrounding the global inflationary backdrop, it is certainly not guaranteed that headline inflation remains around current levels for a sustained period.”

Today’s data reinforces that the next move in the OCR will be up. While acknowledging the uplift in some core inflation gauges, we doubt there is enough evidence in the breadth of moves to spur the RBNZ into shifting its stance just yet, especially with financial and credit conditions tightening independently of the OCR.”