The quarterly inflation data for New Zealand released on Thursday showed that headline consumer prices increased 0.4% on the quarter ending December 2016. The annual inflation rate in New Zealand rose to 1.3% up from 0.4% in the previous quarter, data from Statistics New Zealand showed on Thursday.
The annual inflation rate of 1.3% was higher than the expectations from the economists polled as well as the RBNZ’s November MPS forecast and moved into the RBNZ’s inflation target band for the first time since the September quarter of 2014.
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New Zealand Quarterly Inflation Change: 0.4% (Q4 2016)
Most of the gains in consumer prices came from higher airfares and fuel prices which gave a mixed picture. Higher airfares are expected to be seasonal meaning that the signs of underlying inflationary pressures remain fragile. Rising fuel costs on account of higher oil prices in the international markets alongside an increase in rents and construction costs were attributed to the surprise increase.
Petrol prices rose 4.1% on the quarter while housing-related prices rose 3.3% on the year in December 2016 while the price of newly built homes rose 6.5% and housing rental prices rose 2% compared to a year ago. A continued rise in fuel prices is expected to push the Q1 annual inflation rate towards 2% according to some analysts which could put inflation tight within the 1% – 3% target band of the RBNZ.
Commenting on the recent inflation data, Jason Attewell from Statistics New Zealand said: “Household price inflation is up from a historical low of 0.1 percent for the December 2015 year.â€
Inflation data weighs on RBNZ
The increase in inflation rate has sparked speculation on the RBNZ’s next move with some already starting to talk about a potential rate hike from the RBNZ sometime this year. However, on the same note, the New Zealand dollar has been posting strong gains as well with NZD/USD briefly trading at a two-month high.
