New Zealand inflation likely to have remained broadly stable in Q4

New Zealand inflation data for the fourth quarter of 2017 is set to be released next week. According to an ANZ research report, headline inflation is expected to have risen 0.4 percent sequentially, which would see annual inflation hold stable at 1.9 percent year-on-year. This would be modestly above the central bank’s November MPS forecast of 0.3 percent on a sequential basis.

Food prices are likely to have negatively contributed 0.3 percentage point drag on headline inflation, while petrol is expected to have made a 0.2 percentage point contribution. Other volatile components, domestic and international airfares, are estimated to make a combined 0.2 percentage point contribution, reflecting largely seasonal forces, stated ANZ.

Meanwhile, the housing group is expected to have added to the headline figure again. The purchase of housing component to rise at a similar rate as it did in the third quarter, which is slightly below the average of the past 12 months. Household energy is likely to have risen 0.8 percent, while rental inflation is likely to have remained broadly stable.

“We have pencilled in a 0.6 percent q/q lift in non-tradable inflation, which would hold annual inflation in this measure at 2.6 percent. But as implied by our Monthly Inflation Gauge, it is still really just housing and a few bits and bobs driving this”, said ANZ.

Tradable prices are likely to have risen slightly. The main contributors show factors already mentioned, although seasonal discounting is expected to be seen in several household durable goods.

Core inflation measures are likely to have remained widely stable. In the third quarter, the suite of core measures monitored generally recovered after falling in the second quarter.

“We retain a view that domestic inflation will rise and broaden in time. That is largely predicated on the belief that a cyclical low in wage inflation has been seen and through the combination of skill shortages and government policy changes, wage inflation will continue to lift”, added ANZ.

At 21:00 GMT the FxWirePro's Hourly Strength Index of New Zealand Dollar was neutral 13.1076, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -61.4766. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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