NZ: Headline CPI rose 0.4% in Q2 - ANZ

Analysts at ANZ note that New Zealand’s headline CPI rose 0.4% q/q in Q2, which was below consensus expectations (0.5%) but above ANZ’s estimate (0.1%), which saw annual inflation pick up to 1.5% y/y from 1.1% in Q1.

Key Quotes

“Tradable prices rose 0.3% q/q (0.1% y/y), while non-tradable prices rose 0.4% q/q (2.5% y/y).”

“In terms of the details, June is typically a soft quarter for inflation – today’s print was around middle of the road in that regard. It was not overly weak, but not strong either.”

“But there were some offsets. Broadly as expected, the food group rose 0.8% q/q and petrol prices rose 3.2% q/q. The latter reflecting recent NZD weakness and higher oil prices. Petrol will likely make another positive contribution in Q3 given the recent lifts in fuel taxes.”

“The housing group remained at the fore, and despite our expectation for the recent deceleration to remain in a holding pattern, housing-related prices proved they haven’t found a limit just yet.”

“Tradable price inflation was as we expected. However, beyond petrol and the seasonal lift in some food prices, we’re still left with a picture of soft retail prices, likely a result of intense competition.”

“Overall, while there were hits and misses, today’s release still had firmer tone than were expecting.”

“Core and underlying inflation measures also strengthened slightly. The trimmed mean measures lifted across all levels of the trim in annual terms and the weighted median gained 0.3%pts to 2.3% y/y.”

“While the print is stronger than expected and rising (or stable) core inflation will provide some tentative reassurance, today’s data are consistent with the RBNZ maintaining a cautious stance. Inflation is still below the RBNZ’s target midpoint and the outlook is far from clear cut.”

“If inflation materialises as we expect, the RBNZ will eventually increase the OCR – but that’s a long way away yet and any moves will be gradual.”