Liz Kendall, senior economist at ANZ, points out that New Zealand’s CPI increased 0.1% q/q, slightly above market consensus and their own expectations (0.0%), which resulted in stable annual inflation figure of 1.9% y/y.
“Weakness was driven by tradable prices (-0.4% q/q, +0.9% y/y), which tend to have more transitory impacts. Non-tradable inflation rose 0.7% q/q, with annual inflation in this component ticking up to 2.7% from a downwardly revised 2.5% y/y print in Q3.”
“Today’s print for CPI inflation was below the 0.2% q/q rise incorporated in the RBNZ’s November MPS. But the mix matters. Non-tradable inflation was well above the RBNZ’s expectation of 0.4% q/q, although countering this there were some downwards revisions over history (due to the reallocation of international pre-paid holidays from non-tradable to tradable CPI). The RBNZ will take comfort from non-tradable inflation holding up, but will be vigilant that weakness in tradable inflation might flow through to inflation expectations.”
“Reflecting the pick-up in domestic inflation, core inflation rose, following stabilisation through the middle of the year. Annual trimmed mean measures rose a touch across various levels of trim and are sitting at around 2%. The weighted median was stable at 2.2% y/y. Now the focus turns towards the RBNZ’s sectoral factor model (3pm) for confirmation of the core inflation signal. Our own model estimate suggests it will tick up from 1.7% to 1.8% y/y.”