The pace of inflation has eased in the past three months of the year as the Consumers Price Index (CPI) increased just 1.2% in the first quarter, below analyst expectations.
Annual inflation in the 12 months to March was 6.7%, according consumer price index data released by Statistics New Zealand on Thursday morning.
The result was comfortably below most analysts forecasts, which had predicted it to be unchanged from 7.2% in December, but was driven primarily by a fall in international prices.
Stats NZ consumer prices senior manager, Nicola Growden said inflation was still at levels not seen since the 1990s, despite the decline.
Price increases in vegetables and dairy products were among the largest contributors to annual inflation. Vegetable prices have increased 22% in the past year while milk, eggs, and cheese rose 15%.
Cyclone Gabrielle had led to higher prices in certain crops - such as kumara - but it was difficult to quantify exactly how much impact it had on food prices generally, a Stats analyst said.
Housing costs were the next largest category, with construction costs climbing 11% and household rents lifting 4.3%. Both were down from the December rates, however.
An 8.3% drop in petrol prices helped take some of the heat out of the inflation rate.
Quarterly relief
The Reserve Bank of New Zealand had estimated a 1.8% increase across the quarter, while market consensus was at 1.5%.
The 1.2% quarterly lift in prices was the smallest increase since March 2021, when inflation started to pick up pace, and would suggest annual inflation was running at 4.8%.
Lower headline inflation will be welcome news for the Reserve Bank but it will be concerned about underlying data which shows domestic inflation continued to gather momentum during the quarter.
Annual non-tradable inflation increased to 6.8% from 6.6%, the highest since the series began in June 1999. The quarterly increase was 1.7%, up from 1.5% in the December quarter.
Non-tradable inflation measures the prices of goods and services that do not face foreign competition and is an indicator of domestic demand and supply conditions.
In a note prior to the data release, ANZ economists said there was a risk that if domestic inflation pressures remained elevated it could require another round of rate hikes.
The decline in headline inflation was driven mostly by falling international prices, such as petrol, while most local prices continued to climb.
RBNZ had forecast annual inflation of 7.3% for this quarter in its February Monetary Policy Statement, but that doesn’t mean it will change its policy in May.
The central bank was understood to be paying more attention to underlying inflation pressures than the headline number.
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