Annual inflation hits 4.1% in the June quarter with petrol leading the way

Annual inflation, as measured by Statistics New Zealand’s Consumers Price Index (CPI) increased to 4.1% in the June quarter – the highest annual inflation rate NZ has seen since it hit 4.7% in December 2023.

Higher petrol prices was the main contributor to the increase, no surprise as conflict in the Middle East has impacted fuel supply and triggered major supply disruption in the global oil market. 

Electricity, local authority rates and payments, construction of new housing and other vehicle fuels and lubricants (like diesel) also drove the annual CPI increase. 

The latest inflation figure comes after the March quarter remained at 3.1%, for the second consecutive quarter. Annual inflation continues to breach the Reserve Bank’s (RBNZ) target range of 1% to 3%.

The latest annual CPI inflation figure was above the RBNZ’s projection of 3.9% for the June quarter but in line with forecasts from bank economists. The RBNZ had updated its inflation forecast at its July Monetary Policy Review (previously the RBNZ had projected 4.2%), where it increased the Official Cash Rate (OCR) to 2.50%. 

Last week, Westpac and BNZ economists were projecting 4.1% while ANZ and ASB had gone for 4.0%. Kiwibank was projecting 4.2% (this forecast hadn't been updated since oil prices dropped in June and their economists had hoped to see a figure closer to 4.0%).

More than 80% of CPI basket saw an annual increase in price

Petrol was the largest contributor to the annual inflation rate, up 27.5%. 

Stats NZ prices and deflators spokesperson Nicola Growden said; “higher petrol prices accounted for almost a quarter of the 4.1% annual increase.”

Stats NZ said diesel prices were up 71% but with New Zealand households spending eight times more on petrol than diesel, petrol prices have a larger impact on the CPI than diesel prices.

If petrol and diesel prices had not changed – the CPI would have increased 2.9% in the year to June, Stats NZ said.

Electricity was up 12%, local authority rates and payments increased 8.8% and construction of new housing rose 2.7%. 

Health insurance saw a 19.2% annual jump, which Growden said reflected general increases in premiums.

Lower prices were recorded for oil and fats, which were down 9.1%, and real estate services decreased 4.6%.

In the year to June, 83.4% of the CPI basket increased in price while only about 15% of the basket fell in price.

Stats NZ said in the 12 months to June, 14.4% of the CPI basket increased by between 3.0% and 5.0%, up from 9.6% in the 12 months to March.

Higher petrol prices the largest contributor to quarterly increase

The CPI increased 1.5% for the June quarter, compared to a 0.9% rise in the March quarter.

Higher petrol prices were the largest contributor to the quarterly inflation rate, up 20.1% and diesel prices increased by 47.7%. 

Growden said: “Together, petrol and diesel accounted for almost two-thirds of the 1.5% quarterly increase.”

Petrol prices increased in April but fell in May and June. A deal announced in June between the United States and Iran offered a brief global reprieve as share markets rose and oil prices fell. But now the deal is in doubt, as the US and Iran have resumed strikes against each other.

Alongside this, construction of new housing was up 1.6% and electricity was up 4.4% - both contributed to the quarterly CPI increase. 

“The quarterly rise for construction was the largest since the December 2022 quarter,” Growden said. 

“Respondents reported that higher costs for materials, subcontractors, fuel and labour contributed to rising prices for new housing.”

The purchase of housing was up 1.6% which contributes 10.2% to the quarterly CPI rise.

Lower prices were recorded for fruit, which decreased 8.5% and domestic accommodation services which was down 12%. 

Non-tradeable inflation up 3.4%

The latest CPI figures show annual tradeable (imported) inflation went up 4.9%. Higher prices were recorded for petrol which jumped 27.5% and other vehicle fuels and lubricants, up 71.0%.

These were partly offset by oils and fats which fell 9.1% and audio-visual equipment which was down 18.4%.

Non-tradeable annual inflation (goods and services that don’t face overseas competition but can be influenced by foreign competition) increased 3.4% with higher prices recorded for electricity, which was up 12.0%, and local authority rates and payments jumping up 8.8%.

Lower prices were recorded for real estate services, which dropped 4.6%, and milk, cheese and eggs decreased 9.0%.