Our take on the latest Consumers price index (Wed 16 Oct 2019)
Inflation eased to 1.5%pa in the September quarter
Non-tradable inflation up to 3.2%pa
Tradable prices down by 0.7%pa
The key numbers...
- Headline inflation eased from 1.7% to 1.5%pa. Although headline inflation has eased, the result was slightly stronger than both the Reserve Bank’s forecast.
- Services and non-tradable inflation continue their rise, up 2.7%pa and 3.2%pa respectively. Inflation for both these components has crept up considerably since the beginning of 2018 to eight-year highs.
- Significant price increases included cigarettes and tobacco (up by 7.6%pa), rents (2.9%), and insurance (4.9%). Higher vehicle relicensing fees also pushed up private transport costs.
- Tradable inflation dropped from a 0.1%pa increase in the June quarter to decline 0.7%pa in the September quarter.
CPI components
Annual % changes
...and our reaction
- Although inflation was higher than the Reserve Bank anticipated, we continue to expect the Bank to cut the official cash rate again next month.
- The lift in non-tradable inflation is largely coming from government-driven price increases and other pockets of housing-related costs. There is little sign of a more widespread pick-up in pricing pressures by firms trying to restore their squeezed profit margins.
- Weak tradable inflation reflects the softening world economy. New Zealand’s high terms of trade indicates that prices for our exports have held up relatively well so far, showing through in the likes of meat prices, which have risen 6.5% over the last year.
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