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Liz Kendall, senior economist at ANZ, points out that the New Zealand economy’s ANZ Monthly Inflation Gauge increased by 1.1% m/m in January, but the overall picture remains one of a slow grind higher in non-tradable inflation.  

Key Quotes

“On the face of it, the 1.1% m/m lift in January looks like a decent nudge higher to start the year – it is the largest monthly rise since late 2015. However, the details are less striking, with boosts coming from annual tobacco and cigarette price rises (9.1% m/m, 3% q/q) and a bounce-back in domestic airfares (+22% m/m, -6% q/q) after an astonishingly large drop in December (-18% m/m). Together these temporary factors contributed 0.7%pts – around two thirds – of January’s 1.1% monthly rise.”

“Looking through monthly volatility, implied quarterly growth from the Gauge is sitting comfortably in a 0.6-0.8% range. Annual growth ticked down from 2.3% to 2.2% (the lowest annual rate since mid-2017).”

“We expect non-tradable inflation will nudge higher in the short term, but then dissipate. Broad-based inflationary pressure is still largely missing, outside of housing, with the Ex-housing Gauge running at just 0.5% y/y, versus a 1.1% y/y run-rate a year ago.”