NZ’s June quarter CPI likely to increase 0.6 pct owing to rise in fuel prices; underlying inflation to remain low, says Westpac Research

New Zealand’s consumer price inflation for the June quarter is expected to show a modest 0.6% rise in prices for the June quarter, led by a bounce in fuel prices, according to the latest report from Westpac Research.

That would see the annual inflation rate lift slightly from 1.5 percent to 1.7 percent, although the various measures of ‘core’ inflation are likely to be more or less unchanged. Inflation remains close to, but below, the 2 percent midpoint of the Reserve Bank’s target range.

Food prices rose by 0.6 percent, which is about average for a June quarter. There was a strong lift in prices for dining out and takeaways, no doubt reflecting the large increase in the minimum wage in April. However, vegetable prices were unusually low for this time of year, the report added.

Housing remains a positive contributor to overall inflation. A further rise in prices is expected for newly-built homes and real estate fees. However, the rate of increase is both measures has slowed lately, in line with the cooling in house sale prices.

Meanwhile, inflation pressures are expected to remain subdued in the import-heavy categories such as household goods and electronics. Import prices for consumer goods have risen over the last year, partly reflecting the lower New Zealand dollar. However, firms report that they are finding it difficult to pass on cost increases, Westpac further noted.

Image Courtesy: Westpac Research