NZ private inflation gauge dips in July, housing sector still faces inflationary pressure

New Zealand’s private inflation gauge dipped in July, led by fall in motor vehicle relicensing fees. However, some inflationary pressures are still expected to be seen within the housing sector, ANZ reported.

ANZ's New Zealand July inflation measure down 0.3 percent m/m, the first fall since May 2015. However, the gauge rose 2.1 percent y/y, compared to a rise of 2.5 percent in June. The fall in the transport sector, led by reductions in the ACC levy underpinned a 4.4 percent fall.

In addition, the seasonally adjusted series was also down 0.3 percent, while the ex-housing underlying gauge (which removes indirect taxes, tertiary education fees and housing group prices) remained flat. Moreover, accommodation costs declined across hotels, motels, holiday parks and backpackers.

Of the 36 main series feeding into the 8 key groups, 23 were unchanged, while 7 were up and 6 were down. However, the 'downs' gave impetus. Rents remained subdued. In fact they are showing signs of easing back, which goes completely against the view that housing shortages are the driving force of the housing market at present, the report added.

However, the largest positive contribution came from postal services. Purchase of housing costs continued to lift, though at a slower rate than seen over prior months. Annual inflation in the gauge eased to 2.1 percent from 2.5 percent. The underlying ex-housing gauge is up a meager 0.6 percent on last year.

"A flat-lining pulse for inflationary pressures will keep the bias for the Official Cash rate even lower," ANZ commented in its latest research report.