At the end of the June quarter the latest Consumer Price Index (CPI) is released from StatsNZ. Here are the key points you need to know:
Inflation eased back from 6.7% in the March quarter to 6.0% over the year to June. Prices rose 1.1% in the June quarter, bringing the annual inflation rate down to 6% from the previous 6.7%. This result was actually higher than what the market was expecting, with predictions of a 0.9% rise quarter-on-quarter and 5.9% year-on-year.
Now, when it comes to the main drivers of inflation, food prices took the lead during the June quarter. They're showing no signs of slowing down yet, with vegetable prices up by over 23% year-on-year, and overall food prices rising by 12.3% year-on-year.
The housing and household utilities sector also contributed significantly to annual inflation. Construction and rents are still on the rise, with prices for new builds increasing by 7.8% year-on-year. However, this rate has decreased compared to the 11.5% year-on-year increase in March. Construction costs are expected to cool down further as the pipeline of residential works dries up, making more capacity available. Rents also went up by 4.2% year-on-year.
On the one hand, non-tradable inflation, which refers to domestic inflation, softened a bit on an annual basis. It decreased from 6.8% year-on-year in March to 6.6% year-on-year in June. However, the Reserve Bank of New Zealand (RBNZ) will still want to see more evidence of this cooling, as non-tradable inflation is an essential aspect they pay close attention to and where monetary policy has the most impact.
On the other hand, tradable inflation, which involves international trade, continues to decrease rapidly. This can be partly attributed to lower petrol prices and airfares in the recent quarter. The decline in tradable inflation is where the most noticeable reductions in price pressures are occurring. Additionally, the recent rally in the New Zealand Dollar (NZD) should continue to put downward pressure on tradable prices if it remains sustained.
Lastly, it's important to note that the reinstatement of the fuel excise tax from 1st July will add to fuel prices in the September quarter. However, this increase is already factored into the forecasts of the RBNZ and other institutions, so it's widely anticipated and considered a one-off lift.
That's a quick rundown of the latest CPI figures. If you have any questions or want to discuss how these trends may impact your business or financial decisions, feel free to reach out. We're here to help!