New Zealand annual inflation gauge eases in August, may keep bias for OCR lower

Prices from the ANZ Research’s monthly inflation gauge for New Zealand recorded a rise of 0.1 percent in August after dropping to 0.3 percent in July. The result of last month was driven by reductions in ACC levies, noted ANZ in a research note. Inflationary pressures continued to be weak.

The ex-housing underlying gauge that removes tertiary education fees, indirect taxes and housing group prices rose 0.1 percent. Rents declined a bit, countering increasing construction costs in the housing group. The weak nature of rents questions the extent to what a supposed shortage of housing is driving house prices, stated ANZ.

Out of the 36 main series feeding into the eight key groups, 22 remained the same, whereas 10 rose and four were down. Transport group and purchase of housing mainly contributed positively. The biggest negative contributions came from professional services and rents.

A benign inflationary environment remains. Excluding housing and the odd one-off, there are no indications of inflation. Annual inflation in the gauge slowed to 2 percent from 2.1 percent, said ANZ. The underlying ex-housing gauge rose just 0.6 percent year-on-year. According to ANZ, a limp pulse for inflationary pressures would maintain the bias for the OCR even lower.